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Hello hivers, welcome to my blog. On my previous post I wrote about WHAT ARE THE MOST COMMON MISTAKES TRADERS MAKE and I felt so good putting that up cause I'm sure some of my audience here have fallen prey to it in one way or the orders. So today, I decided to write on Risk Management.
Risk Management in forex simply means staking what you can afford to loose. You know most traders are more concerned on how to make money very quick on forex forgetting the financial market is more of a mind game. Most traders would put huge sum of money, maybe a loan or something that they can't be able to afford if he/she accidentally looses to bad trades.i do tell my colleagues or junior traders, that they should risk what they can afford to loose.
Now,I have a list of tips that could help you in risk management. These includes
Using of stop loss: You can be able to control your risk by placing stop loss in your trade. I assume that we all know what and how to place stop loss. I have been in a situation where I tried scalping in one currency pair earlier this year, and I refused puting stop loss because I had hopes on the trade to go back to profit and then boom!!,it ran on a loss till I came to the realization that I have lost 50% of my capital before I could close up that trade. If I had put a stop loss to a desired percentage, I wouldn't have lost that much. Always calculate your stop loss to a desired percentage you can afford to risk.
Limit your use of leverage: Leverage means having the ability to control large amount of money using none or very little of your own money and borrowing the rest. For example if you chose a leverage of 1:100, it simply means that your your $1 you are risking to take a trade comes in as $100 in the financial market.Meaning,your profit or loss comes and goes in 100folds. That's why it is advisable for traders to chose the leverage 1:500 but if you are extremely Risk conscious you could go for 1:200.
And my final tip in this sessions is
- Use take profit to secure profits: I have fell victim to this kind of situation so many times and trust me is was not a very good experience. While I was still coming up as a trader I have blown my account so many times as a result of not securing my little profits. I always had this quest for more (greed). While trading, always ensure that in your trades you should have at least three (3) take profit point so as to ensure not loosing all the profit if perhaps the trade reverses. In that case you have been able to secure little profit.
That would be all for this session. Tune in for part2!! And also do well to give it an upvote if you love this article, comment and reblog.
Thanks for reading!!