Risk management practices on the exchange Forex
As each transaction is subject to certain forex risk, reasonable use risk management techniques to reduce the chances of losing money and improving profitability. To adhere to the risk management methods in Forex, they need to understand and perform. Let's start.
Terms of risk management in Forex trading
1. Make a preliminary analysis.
To open the transaction need an objective reason. Why do you want to buy or sell a dollar a pound? Why do you think that the asset will rise or fall in price? Understanding what is happening in the market, you increase your chances of making a profit.
Preliminary analysis includes analysis of news that came out and still come out today, the definition of High and Low of the day, as well as the current trend in large time frame.
2. Create a trading plan and follow it.
How many traders - many trading plans (strategies). Someone uses fundamental analysis, someone uses only technical, but someone like trade solely on intuition. The only question for the convenience of the trader and profitability. You can create a strategy from scratch, you can use a ready and change it "by itself" - so long as you stick to the rules of that vehicle.
Using a specific trading algorithm and adhering to it, you can analyze your mistakes to avoid repeating them in the future. And actions by the algorithm will help you not to include emotions in trading and infuse into you more confidence in their own abilities.
Your trading strategy should be profitable in the long run. Until you get these results, trading real money impossible.
3. Set the percentage of losses
Sensible risk management techniques include "rationing" loss for the trading period. Lost 3-5% deposit today - stop trading. In financial institutions, which are traded on an exchange, there is even such a vacancy as a "risk manager" that keeps track of your trade and will not allow you to trade, if you have suffered some losses today. This is normal and even correct. Otero can be avoided by backtesting trading.
4. Do diversification deals
To effectively manage its capital (the so-called money management) do not recommend using more than one transaction in 1-5% of your deposit. Do not forget that many couples are correlated. For example, if gold falls in price, followed by the fall in price of silver, and the Australian dollar and the U.S. dollar, in contrast, can grow in value.
5. It is not necessary to invest all the money in the trading
Trading on the stock exchange - it's always a risk. Use for trading 7-10% of the equity. Yes, for a good profit with Forex Capital should be large enough. But you will agree that the loss of 7% of its capital can be transferred virtually painless. If the money - or the last taken on credit, the consequences will be more noticeable and unpleasant.
6. Use stop orders
Opened a trade - just place a stop-loss. Take-profit and can not be raised, depending on your vehicle, and closed manually after reaching a certain profit. But trade without stops fraught with painful consequences.
Sometimes traders use StopLoss time. No profit - closed the deal with minimal losses.
7. Trend - our friend
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8. Know how to recognize a mistake
All are wrong. If you make a mistake - admit it and fix loss. Draw conclusions. Do not try to beat the market.
If your loss is increasing and the price goes against you - close. The best entry point will be more.
9. Control over emotions
One of the most important methods of risk management is to control your emotions. Greed and passion are not allowed. Need good judgment and awareness. The only way you will be able to adequately respond to changing market conditions. All this produced practice.
If you feel too tense, worried, and not enjoyable trading and estimated earnings - take a break. Exchange will work tomorrow and next week. Psychological comfort is very important for the trader.
10. In doubt - do not trade
If in doubt about whether to open a position - stay out of the market. If you are not sure that the signal correctly understood - do not trade. In trading important clarity and concreteness. Then you will profit.
These simple but effective risk management practices were and remain valid for forex traders with different trading experience. Understand the risks as much as possible to eliminate or reduce them, and quickly respond to changes in prices - everything you need for profitable trading.
Successful trading and remember that the gains from trade is highly dependent on the chosen broker!
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