Important of Forex Risk Management - PowerPoint PPT Presentation

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Important of Forex Risk Management


Learn why profitable forex traders use proper forex risk management and how it can be the difference between making money or blowing your account. – PowerPoint PPT presentation

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Title: Important of Forex Risk Management

Important of Risk Management in Forex
  • 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
  • You can have the best trading system in the world
    and still fail without the proper risk
  • Risk management is a mixture of multiple ideas to
    control your trading risk.

  • 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.

  • 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.

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.

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

  • 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.

  • 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.

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.

  • 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.

Thank You
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