Foreign Exchange Wealth Demystified

  Risk Management is very strategic to regulate trading parameters to fit into a trading plan . Risk management eradicates gambling, helps in planning trade execution and also systematizes your trade. I t is a good idea not to risk more than what you can afford to lose per trade. The conventional wisdom behind this is that you cut your losses short and let your winnings ride! So as to be in trading business for as long as possible. Forex trading risk management is simply a method of controlling risk exposure when trading. By implementing a risk management strategy, a trader is able to limit the negative effects of a losing trade when the market moves in the opposite direction .   Risk management approaches can be broken into: 1.      Risk Planning= Have you heard of Risk to Reward Ratio?   Risk Per Trade is an offshoot of a trader’s risk tolerance. Experts in this field advanced that a trader should not risk more than 2% per trade. ...

  Psychological biases is an opinion or feeling that strongly favour one side or an item in a group or series. Psychological biases cannot be overruled in the trading lifestyle of a forex trader. All traders no matter their level of expertise and experience on the job are prone to battle this monster every day while trading the forex market . Biases occurs in trading due to greed and fear demonstrated by traders when placing a trade, or in a trade. There are basically four types of biases a forex trader must combat on a daily basis in the forex market viz: a)      Anchoring Biases b)     Loss Aversion Biases c)      Confirmation Biases d)     Overconfidence Biases Let’s look at these biases briefly in turn: ANCHORING BIASES Anchoring biases stems from the tendency to feel or belief that there will be a similar market or trading situation in the future. Traders anchors on the existing state of a...