Risk management is a key factor in trading a successful trader in the forex market.
You can be a very talented investor and still lose a lot due to poor risk management.
Taking a risk is not just a calculation of profits and losses from a transaction, but also your emotions and self-esteem.
If you take too much risk, you could lose everything. But too little risk means you'll never make serious money.
The problem is that the risk propensity is individual for each person.
Risks in the forex market can be divided into 4 groups:
- trade risks;
- psychological risks;
- technical risks;
- not market risks.
Let's look at the main trading risks:
- exchange rate risk;
Changing the exchange rate in forex trading is the basis for profit.
Currency markets are extremely difficult to predict, since many factors affect exchange rates.
Therefore, do not forget about the installation of stop loss.
- credit shoulder risk;
The size of the credit shoulder is quite attractive and ranges from 10 to 2000, but this attractiveness also includes the main risk of the credit shoulder.
You need to choose a commensurate credit shoulder and insure yourself against losses.
- broker forex risks;
The broker may change the terms of trade in the forex market, and they become not so profitable for you.
Or if your broker has become insolvent, you may not get your money back.
Trade with brokers you trust.
Consider the main psychological risks:
- lack of self-confidence and self-confidence, focus on the opinion of other traders;
Each trading system is unique, it can be built on well-known algorithms, but all the parameters are determined by the trader himself.
Someone else's trading system is sweating, it's better to hone your skills on a demo count until you get a stable result.
- excessive self-confidence;
If for a long time it turns out to earn a lot and not receive losses, some begin to feel like professionals who have understood the market.
The result of such self-belief is usually sad.
- trade without any system and comprehension;
Entries into the market for a reason I think will be like this, and not otherwise usually bring a negative result. Each transaction must be justified.
- attempts to make an ideal trading system;
There are certain limits, having reached which, it is worth stopping and simply letting the system work, generate income.
- panic in the market.
Quite often, especially after the release of important news, the price of currency begins to jump like crazy. Awareness tends to zero.
Let's look at the main technical risks:
- unstable Internet connection;
Breaking the Internet connection at the wrong moment can lead not only to missing a good entry, but also to the fact that it will not be possible to close the transaction with your hands, if this is provided for by the trading system.
- insufficient computer power;
If you open a set of tabs with graphs, that is, the probability of trading, not exactly adequate display, breaks.
- power outage;
This does not happen often, but it happens, so it is worth providing backup power options.
- equipment failure.
The operating system or trading terminal may fail at the wrong time.
Non-market forex risks are those risks that arise artificially independent of market instruments.
Consider the main non-market risks:
- actions by central banks and national governments, as well as by legislative authorities;
The essence of these actions is the imposition of administrative barriers, which in one way or another hinder the implementation of market trade in its pure form.
- official statements by dignitaries at a press conference, news or social media;
Only part of the above can be tracked, everything else can appear in the information field suddenly, provoking markets to respond.
- natural disasters, terrorist acts;
This is force majeure, that is, it is impossible to predict this.
- forex scams and fraud.
Proposals and announcements that sound too good to be true most often speak of foreign exchange fraud.
Based on the above, it should be remembered that it is impossible to completely escape the risk, but it can be optimized or completely minimized.
Risk management in the forex market is a set of measures and actions that allow you to competently manage capital and prevent the loss of a significant part of your funds.
Risk management is part of a trading system that says how many lots should be held at the moment and how much risk should be taken.
Risk management is the basis of the work of each trader trading in the forex market.
Trading in the foreign exchange market is built on the emotions of the trader, so risk management is designed to eliminate the emotional factor and give this process a more orderly appearance that allows trading with profit.