Important of Forex Risk Management

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Important of Risk Management in Forex
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Index

• Risk Management in Forex
• Important of Risk Management
• Controlling Losses in Forex Trading
• Tracking Overall the Exposure

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Risk Management in Forex

• Forex risk management can make the difference
  between the survival or sudden end with forex
  trading.
• You can have the best trading system in the world
  and still fail without the proper risk
  management.
• Risk management is a mixture of multiple ideas to
  control your trading risk.

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• It can be limiting your trade lot size, hedging,
  trading only during certain hours or days, or
  knowing when to take losses.

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Important of Risk Management in Forex

• Risk management is one of the key concepts to
  surviving as a forex trader.
• It is a concept to grasp for the traders, but
  more difficult to apply.
• Brokers in the industry like to talk about the
  profits of using the leverage and keep the focus
  off of the drawbacks.

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• It can causes traders to come to the trading
  platform with the mindset that they should be
  taking high risk and aim for the big bucks.
• It seems all too easy for those that have done it
  with a forex demo account, but once real money
  and emotions come in, things change.
• It is where the real risk management is important.

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Controlling Losses in Forex Trading

• One form of risk management is controlling your
  losses. Know when to cut your losses in trade.
• You can use a hard stop or a mental stop.
• A hard stop is when you set the stop loss at a
  specific level as you initiate your trade.

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• A mental stop is when you set your limits to how
  much pressure or drawdown you take for the trade.

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• Figuring out where to set the stop loss is a
  science all to itself, but the main thing is, it
  has to be in a way that the reasonably limits the
  risk on a trade and makes good sense to you.
• Once the stop loss is set in your head, or on
  your trading platform, stick to with it.

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• It is easy to fall into the trap of moving the
  stop loss farther and farther out.
• If you do this, you are not cutting the losses
  effectively, and it will ruin you in the end.

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Tracking Overall The Exposure

• While using the reduced lot size is a good thing,
  it will not help you very much if you open too
  many lots.
• It is also important to understand the
  correlations between currency pairs.
• Example, if you go short on EUR/USD and long on
  USD/CHF, you are exposed two times to the USD and
  in the same direction. It equates to being long 2
  lots of the USD.

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• If the USD goes down, you have a double dose of
  pain. Keeping overall exposure limited will
  reduce your risk and keep you in the game for the
  long haul.

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Thank You