Forex for Beginners: How to Make Money in Forex Trading (Currency Trading Strategies) by James Stuart

Author:James Stuart
Language: eng
Format: mobi, epub
Publisher: Liraz Publishing
Published: 2014-01-16T22:00:00+00:00

7. Forex Trading Risk Management

Your first concern when trading Forex should be not to risk too much money on any given trade. Unfortunately, many traders start trading Forex without thinking about the risk that they are taking - only about the potential rewards.

If you want to succeed in Forex you must take into consideration the maximum percentage of the total trading money that you should risk in any one trade. Actually, your ability to limit your losses is equally as critical (or even more critical) as your success in managing winning trades.

The goal of practicing a good Forex money management is to minimize risk and increase payouts. For starters here are 3 quick tips:

First, Trading Forex is fun and exciting and money can be made; but you must also keep in mind that like with any other trading there is the risk of losing. Hence, Forex trading rule number one: do not trade with money you can't afford to lose.

Second, never borrow money while trading, trade only with your own money (this does not apply to leverage that is provided by your broker).

And third, set and stick to a budget. Write it on your forehead if you have to, but no matter what, when you hit that number, quit trading for the day.

Good money management calls for adopting a conservative investment strategy that means that you should never risk your entire capital.

When you enter a trade (no matter how great it may be), always ensure to only invest conservatively. Forex trading like any other investing is not a sure thing, there is always a risk factor involved. A conservative investment strategy helps you to conserve your money when things go wrong.

Forex trading offers a lot of choices to the trader. A good money management strategy requires diversification. The volatility that accompanies trading currencies is much distinct from say trading commodities as well as stocks. Obviously, the payouts may vary depending on the currency pair which is selected. As the saying goes, never put all your eggs in the same basket.

Losses in a trade should be accepted on a positive note. The effects of a trade that goes against you are able to impact the future or successive trade decisions. Expecting losses whilst investing can assist traders in identifying the areas which may happen to be unnoticed. Losses needs to be seen as a stepping stone instead of having it affect you.

Start off slow and scale up - this has a significant role particularly for beginner traders. Certainly do not fall for the emotions and commit your entire amounts right away on one trade. Investing in small amounts continually helps you to take a self-disciplined approach. The majority of Forex brokers allow for a small minimum trade sum. Use this advantage and be sure to trade with patience.

Do not expect to make gains with Forex trading as soon as you made your first deposit. No matter if you commit $200 or $3000 the exact same key facts apply. Trade in small amounts until you have the sense of the assets that you're trading.

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