The Single Most Important Thing You Need To Know About FOREX TRADING

 Risk according to Merriam-Webster dictionary is possibility of loss or injury; the chance that an investment (such as a stock or commodity) will lose value. A trader’s appetite for risk is a crucial factor in forex trading career. The market is not for all time winners. There are moments you just have to let go.

 

In my candid opinion, taking losses as part of the game is the bedrock of good trading technique. Trading is not about your winning percentage, it is all about how much money you can consistently pull in profits.

Take a look at the following Statistics:

Traders

No of Times Traded

Trading Period

Winnings

Return On Investment (ROI)

A

80

10 Months

58

$4000

B

40

10 Months

5

$15000

 

Trader A – Traded 80 times over 10 months. He won 58 trades. Made $4,000 in profits.

Trader B – Traded 40 times over 10 months. He won 5 trades. Made $15,000

Analysis:

Trader A:-Higher winning percentage, took profits often but too little ROI.

Trader B: - Had lower winning percentage, let profits run and cut losses early, massive ROI

It is evident that Trader B showed a clear understanding of risk management when in active trade and was rewarded greatly for his approach.

 

Foreign exchange trading exposes traders to a certain degree of risk that a trader must seek to manage effectively because, transactions involving currency is sensitive to sharp rises and falls as relevant market value fluctuates. Market conditions, system performance and other factors militates against a trader in one form or the other.

 

Risk management is an idea of having a plan of setting a maximum amount of risk a trader is willing to place on any one trade. A trader must have a clue of how much to invest in a position or exit points. Controlling your risk is everything.

 

Comments

Post a Comment

Popular posts from this blog

HOW TO INTERPRETE THE NEWS TO MAXIMIZE PROFIT TECHNICALLY

In the Forex reports there are 3 statistics to make use of: ü Previous ü Forecast ü Actual When the Actual outcome is greater than the Forecast outcome it means a more positive situation for the country’s economy. So you go long in agreement with Moving Average Crossover prediction of the Price. On the contrary, the opposite occur when the actual outcome is lesser than forecast digits. This indicates a negative economic situation for that economy, so you will go short in agreement with Moving Average Crossover prediction of the Price. In a situation where there is equal outcome you stay out of the trade and wait for the next high impact economic report. It is worth mentioning that you need    to take into consideration the variance in the statistics released so as to have a desired result. If there is a wide difference in figure released reversal is sure to set in and mop up the gains, so the market will not trend well as expected. Do not stay more than Fiftee...
Read more

HOW TO TRADE THE NEWS TECHNICALLY TO EARN MASSIVE PIPS

News is a tool in the hand of a fundamental trader however a Technical trader can maximize its usage profitably by riding on the trend to rake in a mind-blowing profit during the moments of momentary surge in the action of the market prices. In the original parlance of the business, this style of trading is regarded as scalping. What we are aiming at is scalping the news with a degree of confidence. To earn a massive profit the following should be taking into consideration: a)      Central Banks Calendar b)     Economic Calendar c)      Risk Management Instructions: Go to www.forexfactory.com set the clock to read your time zone and save the settings. Revert to the economic calendar you will see a three levels of news impact viz:         i.             Low: Yellow       ii.     ...
Read more

SIGNIFICANT LEVELS OF RISK MANAGEMENT

   There are two major significant levels of risk management which must be practiced and managed with each trade a trader implements. ·         Capital Protection ·         Profit Protection Capital Protection Capital protection is ensuring of the security of trading capital via strategies tested, proven and guaranteed to produce the expected outcome. The idea of capital protection is a sound ethical trading practice that underlies the concept of money management. Capital protection seeks to imbibe in trader the defensive art in forex trading enterprise. Generating returns is important but not the bases of capital protection, though we seek to make as much as possible profits for each trade. The trading phrase-”cutting your losses and let…ride” is the bedrock or forex trading profit maximization tactic. Cutting loss before trading and not as soon as the trade goes against a trader is the focal p...
Read more