Forex market risks its minimization

Have you already seen in your trading career that professional Forex trading is simply a numbers game? Forex markets, by their very definition, are unpredictable.

And we, as traders, are in the business of trying to predict them. Does this mean that profitable Forex trading is not possible? You must bring yourself in alignment with the way that the Forex market works—NOT try to bend the Forex market into WHAT YOU THINK IT SHOULD BE. In this article I want to help you understand a few things about Forex trading so that it will help you to become a professional Forex trader and so that you can make profits on a consistent basis.

Forex trading involves both potential profits and potential loses. For this reason, minimizing the risks of this fast-moving market is critical to achieve success in your daily trading and over the duration of your entire trading career.

This article is entirely designed around the idea of helping you to reduce risks at every given opportunity you can find. This is just one quick, little example of how improper risk strategies can severely affect the quality of your trading results. Let me explain another set of numbers to you here with this simple example.

I want to teach you about these numbers and some of the strategies that correspond with reducing risk which in turn lends itself to increasing profitability and putting the odds squarely on your side. The more important factor in this example is the risk and reward per trade.

Here is an image of the most current CHFJPY DAILY chart with an orange horizontal line marking the entry point just after the appearance of the last red arrow. Follow the ORANGE ARROW on the chart to see the course of the trade. This trade would have taken many days to realize as we are currently viewing the DAILY charts here. In this case, we could use the most recent swing point as a nice place for our stop loss, which would make it approximately pips stop loss.

You may notice also that this screen shot was taken on the weekend when the spread has increased the spread is not typically 10 pips on the CHFJPY pair during normal open trading hours but this does not matter for our example; I just wanted to point it out for you.

For this example, which is just for the sake of illustration, we will use a 1: With pips as the stop loss, a 1: This is a quickly chosen, cherry-picked trade to help illustrate this lesson about the power of our risk and reward levels. There are a few factors here that I want to point out to you which will help reduce the amount of risk you are taking when trading.

As your skill increases then likely your ability to spot proper setups will also increase. Trading, of course, is not an easy business. It can become simple , but it will never likely become easy.

What we want to do as traders is reduce our amount of exposure and risk in the foreign currency markets. I have four suggestions that you can employ to help you reduce your overall risk when trading.

There are several ways to properly measure and use risk when trading currency.

This method will require you to calculate your stop loss level when placing the trade as well as the size of the trade itself the number of lots you are going to need to use to equal the amount of dollar-risk you want to use. When trading larger timeframes this is usually not a problem at all because you have time to think and to plan ahead of your entry point.

Trading lower timeframes, however, can make this style of money management problematic. This software has a wonderful ability to help you manage risk according to different options such as percent-risk and fixed-lot-size. Many of my clients and subscribers like to use this software because it simplifies their trading and helps them to focus on the most important thing for them: They much prefer to use a software like this which streamlines the order entry process.

Scalpers also very much enjoy using this software because of the speed of entry which it can provide. This allows you, if this is your preferred method of managing risk on each trade, to trade based upon the available equity in your account. Can you see how powerful a tool this can be to help you reduce your risk? Increasing your position size may generate you big profits, but may also cause you to head down a path of destruction.

Always control your trade size because, even with good analysis of the market, the possibility of losing always exists. There is always a loss coming around the corner and you need to be prepared for it—both emotionally as well as with your risk-management plan. Do not ever make a knee-jerk decision to power into a trade when the price just seems to be taking off like a rocket—maintain your discipline and your money management!

Are You Trading Too Aggressively to Stay Actively in The Game After 5 Consecutive Losses? These are fundamental numbers that many trainers teach but in some ways they are just random numbers and you should trade with the amount that you feel comfortable with for your account. It must be an amount that you could safely lose that would not affect you emotionally or affect the future performance of your account.

Trade Only With Money That Can Be Lost With Little or Ideally NO Emotional Attachment. If you have no emotional attachment with each trade that you place then you are free to let trades run and you are free to keep in control over your trading day. Even if you face a loss or two then you are able to continue on looking for good setups. The stop loss order is one of the most effective ways to minimize your loses in Forex trading.

This function will close your opening position when it reaches a pre-determined point that you adjust depending on your analysis of the pair movement and its resistance and support points. This is a very simple matter but I just wanted to mention that you must always use a stop loss. If you have been a trader for more than a few months then you have probably already realized the absolute necessity of placing a stop loss with every trade.

They may close at their mental stop point or prior to it if they see a shift in the market conditions and the anticipated move does not seem to be working out. This is not recommended for new traders of course. Always place your stop loss at the outset of each trade. This will protect your account from huge losses drawdowns and will help you manage your trading risk appropriately.

One of the most obvious ways to gain experience and to learn about trading is to follow the market, studying it like one would study a foreign language. Technical analysis tends to study the past currency pair movement and predicts its future movement based on its history and certain mathematical signals. On the other hand, fundamental analysis studies the economic factors and watches the events that may affect the price of certain currencies.

Fundamental analysis can be posted to your inbox on regular basis from a number of popular sites like ForexFactory. There are several different news sites that can help you with learning about fundamental analysis. You can do a simple Google search for them and you will find plenty. Another popular one is DailyFX. I recommend that, if you are an active trader, you keep on top of the high impact news releases that come out each day or week that can and do affect your trading pairs.

If these professionals know more about Forex than you do, and they are making more money than you do, what does this tell you? Perhaps it is a call or signal to you to increase your study of the markets. Do you need to study the economic reports more? Imagine for yourself what the professionals do and also read about what they do. Indeed you would be likely to earn more and find better results if you were to treat your business with the same care that the professional fund managers give to their accounts.

There is an expression in business and personal achievement that states: Consider this with regards to your trading business as well. I think you can use this one principle to help overcome some hurdles that you might be facing at the present time.

Some traders prefer to stick to just one currency pair. This is the correct thing to do. However, even worse though, if the market conditions continue to be undesirable for a long time they may lose patience and start to trade recklessly and without proper setups. This, even with the pair they are most familiar with, will often cause serious losses.

You may wish to increase the number of pairs that you watch if you are finding yourself often getting caught in times of unfavorable moves. You will also want to check the time of the day that you are trading since not all times are created equal in the currency trading world. This can be a huge trap that many traders fall into.

Have you been there yourself? It is deceptive to want to look elsewhere for the setups you are looking for rather than being patient to wait for them with the pair you are focused on.

Are you actively reading books on Forex trading and on trading success in general? If you are not then you are missing the boat and not growing as a trader as fast as you could be. At the same time, books are wonderful but nothing can replace the raw experience that comes from placing live trades on both demo and real accounts alike. Demo accounts will not give you quite the same emotional involvement as a live account but still it is very valuable experience that cannot be replaced by any quantity of reading or study time.

Make sure that you are constantly taking action on what you have learned and on implementing your trading system. This does not mean to trade recklessly or to avoid obeying the rules of your system just so you can place a trade for experience. It means rather that you will only gain experience by gaining experience. Imagine that you have been trading for five more years than what you have traded now… will you be better and much more experienced at this point in your life?

We both know the answer to this coaching question. This should compel you to continue on taking action on that which you are learning. You should continue studying your trading system with a fine-tooth comb but then at the same time apply what you have learned by placing trades according to the rules of your system.

This QUANTITY of experience is what will add up to make you a much better trader in the end! Know Your Trading Edge and Work With These Principles to Reduce Your Risk On Each Trade. If you know your system well, and you know what you are looking for with each trade setup, then you will continue to get better and better as a trader as you gain experience.

Remember that nothing can replace this raw experience, whether trading on a demo account or a live account. The live account will give you the best experience because of the emotional involvement only make sure, of course, that you are trading with conservative and appropriate risk settings based on your level of experience. Go out there now and create for yourself an action plan. Maybe you need to buy a trading education book I have a great list of books on Forex trading for you here and begin studying it.

Maybe you need to revisit your trading strategy and learn all of the rules by heart. Maybe you need to open up a new demo account and start again from scratch. Maybe you need to buy a trading journal where you can write down all of your trades and the results of those trades.

Whatever the action is that you need to take, I encourage you to go and do it now without any further delays. Only study and focused action will move your trading success forward. Good trading to you this week ahead!

I am also a Forex trader, a programmer, an entrepreneur, and the founder of ea-coder. I have created two of the most popular trade copiers and other trading tools for MT4 that are already used world wide by hundreds of currency traders. I really enjoy your blog and your trading!

You are one of a very few traders who practice what you preach. Congratulations on a wonderfully profitable year and long may it continue. Thank You Phil for your kind words. They really mean a lot to me. I am glad you like my work. Must say I like your approach,professional attitude and what I read. Realistic and attainable goals. Am a recent subscriber and enjoying the experience. I love what I am doing and the biggest payout for me is knowing that people like my work.

I think I got these from http: Well because actual monetary profit is only really an indication of one trade, your success rate will tell you what you are doing right and equally importantly, where you are going wrong. They fall into the bad habit of interpreting fortunate outcomes as proof of their analytical acumen and end up losing big when they increase their risk levels on poor market interpretation.

People should learn how to minimize risk when trading currencies in Forex. Your email address will not be published. You may use these HTML tags and attributes: Notify me of followup comments via e-mail. You can also subscribe without commenting. Rimantas Petrauskas is the author, a Forex trader, programmer, entrepreneur, father and a husband. He has been creating software for currency trading and signal delivery since , and has created hundreds of trading robots for his customers.

He strongly believes that with a Positive Mental Attitude we can achieve any goal. More About Rimantas Petrauskas. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.

Forex Trading Tips - 20 things you need to know to be a successful trader

You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All purchasers of products referenced at this site are encouraged to consult with a licensed representative of their choice regarding any particular trade or trading strategy.

No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.

Information contained in this product are not an invitation to trade any specific investments. Trading requires risking money in pursuit of future gain. That is your decision. Do not risk any money you cannot afford to lose. This document does not take into account your own individual financial and personal circumstances.

It is intended for educational purposes only and NOT as individual investment advice. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. December 8, Rimantas Petrauskas 7 Comments Forex.

4 Ways To Minimize Foreign Currency Risk

Always Look for Opportunities to Reduce Risks and Increase Successful Outcomes. How Then Are These Systems So Profitable? Let Us Now Look at Ways to Reduce Our Overall Risk When Trading There are a few factors here that I want to point out to you which will help reduce the amount of risk you are taking when trading.

Use the Appropriate Trade Size Based On Your Account There are several ways to properly measure and use risk when trading currency. Saving Time With Accurately Placing Trades With Correct Lot Sizes. Control Losses With Stop Loss Orders On Each Trade The stop loss order is one of the most effective ways to minimize your loses in Forex trading.

Study the Market Like a Mad Scientist One of the most obvious ways to gain experience and to learn about trading is to follow the market, studying it like one would study a foreign language. Do Professional Traders Know More About Forex Than You Do… Or Less? Expand The Pairs You Trade or Focus on Fewer Some traders prefer to stick to just one currency pair.

Nothing Can Replace Raw Experience. Conclusion Whatever the action is that you need to take, I encourage you to go and do it now without any further delays. Thoughts on 10 of the Best Trading Books for Foreign Currency Traders. View all posts Author website Facebook GooglePlus Instagram LinkedIN Twitter Youtube. December 9, at 8: Hi Rimantas, I really enjoy your blog and your trading! Thanks again for making your trading system and knowledge available to the public.

December 9, at 9: December 10, at 3: December 10, at 5: Dear Colin, thank you for your kind words. December 11, at December 11, at 3: The Writing Is On the Screen: Use Signals to Boost Your Trading Power says: December 12, at 6: Leave a Reply Cancel Reply Your email address will not be published.

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How to Close All Open Trades on MT4 at Specific Time MT5 is about to replace MT4 client terminal Awesome Tips For Your Own Forex Copy Trading Signals Service. About Me Rimantas Petrauskas is the author, a Forex trader, programmer, entrepreneur, father and a husband. Follow Me facebook googleplus instagram linkedin twitter youtube. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors.

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