What is Forex Risk?
Do you know that the Forex market is the largest market in the world? And more than 1.4 trillion dollars is traded every single day. That is big in every sense.
Traders profit or loss as a result of change in the exchange rates. The gain or loss in this market can also be huge. That is where risk management comes in place, it is simply the steps you take to reduce your loses and keep you in profit on the long run.
The number of people participating in Forex trading is increasing every day. And the sad truth is that some percentage of these set of people will lose their money while some will meet what they do not expect. Only few people will profit or exceed their expectations. As strange as this might sound to the ears of someone just starting out, it is real and true. All of that happens because the market is constantly changing and this change cause a lot of risk. That is why you and I need a Forex risk management education before committing to the market.
What Percentage Par Trade You should trade
There is something called drawbacks in Forex trading. The term means the more money you lose from your trading account the more difficult it will be to recover that account.
Let’s say you trade 25 percent of your account, and you lose the trade the first, second and third time. You will be left with one attempt. And that’s how most beginners to trade. The reason why this is bad is this, drawback will always happen because it is in inevitably and you have to be able to see off your drawbacks before you can be profitable.
So you have to put drawbacks into your plans and look for a way to prevent it.
The surest way to prevent it is by using Forex risk management. Don’t risk more than 2 percent of your capital par trade.
Other ways you can manage you risk in forex trading are:
Only use a tested trading plan.
You must have a trading plan and the must test it before you put your trust in it.
Use stop lose.
I believe the name itself has all the explanations you need. Never place a trade without knowing the stop lose.
Don’t put all your eggs in one basket.
Diversify your investment. Don’t make forex trading your only means of livelihood. Many people focus only on forex and they are very successful, but is good to be on the safer side.
Don’t Stop Learning
In any endeavor in life especially the one that is not stable like Forex, you have to take learning as an important part of the trade.
Learn from yourself, the mistake you made in a trade and so on. Also, learn from other people in the business too.