Risk management instructions, quick and easy foreign exchange tips you need to know

Trading in the forex market is a profitable and popular type of activity, but entering the market, like any business, should bring positive emotions to the trader. But also, starting work on the international currency market, consider the possible risks that arise in this area. Therefore, any beginner forex trader, it is important to know what exactly will allow him to avoid increasing risks.

The first and most basic - take into account the peculiarities of the international currency market forex. This is an unpredictable mechanism that can not be accurately predicted. To this end, the risk management methodology is applied.

Risk management is the search for a source for solving problems related to risks and directly monitoring them. That is, this realization that a trader understands the moment of risk, he realizes the fact that he can not invest or spend more money than he can afford.

Such risk management is necessary for us so that we can calculate the basic amount of funds and allocate it for trading, this is the money that we are not afraid to lose in case of failure. To this end, any beginning trader will need working capital.

This is a quality control indicator, the amount of money that is used directly for trading. These funds can be controlled by regulating the investment volume and paying the commission, which the player undertakes to pay. Organize your transactions in such a way as to apply them only those negotiable amounts of funds with which you can easily say goodbye.

But there is a logical question - how much can we risk?

As for the volume, it would be more rational for one trade operation to use a risk of 2-5% of its capital. The main thing is to properly dispose of your funds, doing this so that in one transaction you will not lose a fortune.

Any trader needs to be able to limit his risks, to do so in order to avoid large-scale and large losses in the trading process.

But how to avoid major investment losses?

The first and most basic is the adjustment of the ratio of profit to risk.

The ratio of profit / risk reflects the funds that you earned relative to the amounts that you risked. In other words, potentially earned money is the money that you risk.

This ratio can be calculated on the basis of the trend of a certain currency pair, following the increase and decrease in the value of the asset. This will allow you to determine the favorable conditions and opportunities for the transaction. That is, by focusing on the correctly calculated ratio of profit to risk, you can always open a decent and profitable position.

The ratio of 3 to 1 is a good choice, it indicates that investments can actually pay off. It is important to analyze the trend and investment lines in order to determine the level of risk and return on the selected currency pair.

Aspects that should be considered when managing risks:

1) compare the upper and lower range of the currency instrument with the current value of the investment. This will give you a chance to realize your potential losses and compare their volume with the potential profit;

2) monitor the mood of the market, especially with respect to your chosen trading instrument. This will allow the most accurate management of trading operations;

3) identify the possible factors that to some extent affect your instrument or the selected currency pair.

Keep the situation under control and check for news that may affect the currency pair;

However strange it may sound, but keep a journal. Such diaries allow you to monitor the success and profitability of operations, mark out actions for improving trade and monitor the circulation of funds.

Pay special attention to:

1) the area of concluding transactions;

2) selectable entry points to the market;

3) sizes of positions;

4) the result of trading operations;

5) control over emotions.

6) used leverage.

Trade in the forex market will not be successful without risk control. Adhere to measures of caution and set rational goals, balancing risks and your financial capabilities.

We wish you successful trading!