Risk diversification and portfolio for Forex trader
Concept ofrisk diversificationandportfolio diversification"are known, likely, every trader and investor. Don't put your eggs in one basket, distribute the assets in order not to lose all at once or in case of loss of one asset to compensate the profit on the other. However, many participants Forex lose their money because of the excitement, fear, greed, mismanagement of money (see the article "the best money management Forex") and other factors. In this article we will talk about what the risks are of trader Forex trading, how to properly allocate and how to prepare a portfolio of trading strategies.
Types and risk diversification in Forex trading
Since we are dealing with money, there are 2 groups of risks of Forex trading: trading and non-trading. Non-trading risk is the possibility of losing money, entrusting their unreliable broker or managing trader. Everything is simple: work only with trusted and reliable Forex brokers. The most famous is Forex4you, Alpari and InstaForex .
Trading risks arise directly in the course of trading at the Exchange. They can be divided into several subspecies:
1. associated with emotions (fear, passion, greed).
2. the quality of trading conditions (slip, etc.).
3. associated with a deviation from your trading system (TS).
Emotions were and remain the main enemy of the trader. Repeat for the umpteenth time, until you have learned to calmly relate to profits and losses, until you feel the fear of losing money or you regret that could earn more (greed), did not trade on the big money. Cent accounts are very popular. Trade on small deposits, while your emotions do not go by the wayside. Gradually increase the depot it, expanding comfort zone and see what can be achieved over time.
The terms of trade are different brokers, different types of accounts, etc. to avoid trading risks like slipping prices, failure to stop, because it is too close to the current price, etc. -Choose good brokers. Carefully analyze their business and choose the best for you. Details such as the size of the spread, the number of simultaneously open trades that is banned or allowed locking (locks)-for traders every little thing. Do not ignore these little things in the future, this will result in significant amounts of profit or loss.
Your trading system, and, to be more precise, accurate implementation of trading algorithm, also avoids certain trading risks. The VEHICLE for this and is designed to relieve pressure on the trading decisions with the trader. There is a signal at the entrance to the market-open position, no-wait.
What is portfolio diversification?
That can be understood by the diversification of the portfolio? This trade by two or more policies or the use of multiple currency pairs. Explain. Trading a VEHICLE, even profitable, in certain periods of time are possible. If you are using 2 TC (traffic on three or more VEHICLES is seen as problematic, if we talk about manual trading), it is possible to obtain both damages and arrived at the designated times. Let's not forget about the possibility of using mechanical trading systems (MTS or advisers), as well as trust Forex (pamm-account , etc.). In other words, a good trader always planned to be used as his capital and on how many parts it needs to be split. This will be a way to diversify your investments and reduce the risk of loss of funds.
Having few assets in the portfolio, it is difficult to lose them all at the same time. Most traders on its difficult path to lose deposits. Where to get money for a new deposit (after working on the bugs, of course)? Smart trader-investor always uses the long term planning, so can count on income from other sources, not just from the salary (many traders continue to go to work), or money set aside to rest or buying important things.
Hopefully, you now understand the importance of diversification of risks of Forex trading and create a portfolio that will work for you. Want to trade-trade! But it is always better to have a good plan. Over time, you will make sure of that.
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