A Guide to Risk Management and Financial Management for Beginners

Before you start working in the currencies platform, it is crucial that you set aside the opportunity to examine the markets and that you start your trading career with a reasonable philosophy and system at hand. At that point, it is essential that you deal with your finances and investments with utmost care. 

In addition to having an idea of which currencies to use and the ability to identify entry/exit signals, one needs to administer his monetary resources and to use strong risk management tenets when using a trading strategy.  

Core equity

When it comes to managing money, there is a variety of plans and methodologies that one can use, but at the heart of a major number of those strategies would be the concept of core equity. This represents the volume of money that you started forex trading with. To take an example, if one begins trading with ten thousand dollars and has a thousand dollars in open positions, then the core equity in this regard would be nine thousand dollars. 

Regulating risk

One of the general trading strategies to apply for beginners is to restrict the scale of risk to just one percent of your core equity. Thus, if your total equity volume stands at a hundred thousand dollars, you must ensure that the amount to be set aside for investment does not exceed one thousand dollars or so. To do this, you could also place a stop loss order at the right position when entering a transaction. 

Over time, as your account equity grows or depletes, you would need to re-adjust the volume of your risk in the same manner. When the account volume drops, ensure that the risk is also constrained in an equal manner. 

How to entertain higher risk?

Applying the same rule, as your account balance rises, the level of risk can be scaled up. When the trade is running in your direction, one could afford to raise the level of risk to a marginal extent as well. There are certain traders who would be willing to make larger investments and entertain more risk for the prospect of winning more money. As a beginner, you could stretch your limit from one percent to five percent to expand your profit making potential. However, one needs to be cautious when dealing with risk as investing more could also magnify chances of loss. 

If you need help with risk management and money management, then get in touch with an online Forex trading company in Malaysia. WesternFX operates on the international level, with online trading services offered across multiple Asian countries including in Malaysia and Singapore and others as well. Get in touch with us to see what this field has to offer!