When we decide to become a full time or part time forex trader, we really have to be serious about pursuing this profession and if not the possibility of losing our capital is very large. And one of the important materials that we must understand in running this business is Forex Trading Risk Management . By understanding it, we are expected to reduce the risk of losing capital in an instant. And here are some components that must be understood in studying risk management.
Margin & Leverage
Margin and leverage are two important components that must be understood by all forex traders.Margin is the amount of capital or money needed as a guarantee to open a trading position. The required margin is smaller than the actual size or trading volume so that we can trade a currency pair with a larger amount than the capital owned because as a forex trader we can use leverage or leverage to do this.
Even though with leverage we can increase profits but also keep in mind that with our leverage it can also increase the risk of losing capital. So we must be wise to use this concept. It is recommended that you can use the concept of 10: 1 leverage so that the forex business that is being run is in a safe condition.
We as forex traders must know when to close trading positions that are open either manually or automatically by using the stop setting technique. We do this action to reduce the risk of losing capital due to wrong opening a position point. We can set the stop position both when the price position is below the support line or above the resistance line.
Risk & Rewards Ratio
Well risk & rewards this ratio is something that needs to be considered when determining the stop and limit when opening a forex trade. If we already know the potential losses and gain profits, we can adjust the trading position by setting the stop position according to the high risk and the limit position according to the high profit or profit. Actually the concept is the same as setting stop (Stop loss and Take Profit).
How, interested in joining the forex business? Please open a DEMO Account first to find out all the risks and how to get the benefits before opening a REAL Account . And don’t forget to apply risk management when doing this forex business 🙂