Risk Management in Forex Trading - How To Manage Risks

Foreign exchange today, stands atop the peak of the trading world. Carrying a value in trillions, and tens of thousands of traders participating, Forex exchange is a giant of a field! The desire to make good money exists in the hearts of every man and woman. For some, trading is a formula to make a quick buck. This lure of profits is what sets the trap for several FX players. While lucrative on the outside, the fact remains known only to traders, that winning in Forex is no easy task. Only 10-15% of the players make it out successful, while the others face scary losses!
 

The element of risk is one that can't be eliminated in trading. Be it stocks, currencies, or futures - there is always a chance of your trade turning awry. While not a field of the gamble, Forex is definitely one that has similar repercussions. While good currency trades reward you magnificently, bad ones can effortlessly wipe out all your winnings. This risky nature of Forex trading is what makes it a field that needs immaculate levels of focus. 

Risk Management in Forex Trading

One side of the balance scale has profits, so it is only obvious that the other have losses. Technical and fundamental analysis has become a necessity to thrive in Forex. Without the understanding of price movements and market behavior, forget profits, even existing in FX markets will become impossible. Economy is such that big and small pairs alike move like a roller-coaster. While some days they are dominant and traders enjoy an uptrend, on other days even the best of currencies plummet down. To gauge this unpredictability isn't possible by humans or bots. However, Forex exchange despite of its chaotic nature still sticks to a trend. With the right research, an adept trader can easily get hold of this trend and capitalize on it, to make consistent winnings.
 

With all said and done, risks lie in plenty. While some losses only cost a few hundred dollars, others can wash out your earnings! 

Here are 4 efficient tactics to manage your risks and make healthy profits:
 

1) Analyze The Potential Losses Beforehand: The most basic step to take, in order to prevent losses from piling, is to speculate the various risks. Forex is a field of analysis and prediction, while the environment might be chaotic; it is always possible to speculate. You can start off by seeing the various ways your trade could go wrong. This will help avoid the said methods and focus more on profitable openings. Risky trades often yield better; knowing the right measure of risks to take is the formula to winning Forex. Professional traders reach the top by performing in-depth fundamental and technical analysis. These two methodologies are indispensable and will become the stepping stones to your trading success.
 

2) Study Market Liquidity: Forex trading is one of the most liquid fields in trading. It has a value of $5 trillion today, and this is only growing! A market is said to be liquid when there are a good number of buyers and sellers. An increase or decrease on either side can lead to an imbalance, which will inevitably birth bad trades. Studying price movements helps beginners and professionals alike, to win more and lose less. Forex exchange has a plethora of currencies to choose from; not all are profitable at every instance. Major pairs like USD/EUR also see drops! Studying price movements helps pick the best currency at a particular point of time.
 

3) Dedicate Risk Capital: When you know losses will happen at some point or another, why not allocate an amount for it? Risk capital is an amount which is committed to losses. While trading with $10,000, keep $2500 as capital you are willing to lose in a trade. Keep 2-3% of your trade investment as risk capital.
 

4) Leverage Carefully: Leverage is one of the reasons players win big and lose bigger. Forex, being a field of tremendous capital value, offers traders the provision to hold high positions without owning much capital themselves. Leverage is money borrowed from brokers, in order to hold high-value positions, which would otherwise be impossible. In an aim to make big earning, traders tend to leverage huge amounts, only to lose them later. As tempting as it may seem, take smaller levels of leverage.
 

Forex exchange lies profitable as ever, and all the more risky. To win a trade in foreign exchange is easier said than done, with the levels of risks it houses! With a good understanding of the possible risks and losses, Forex becomes a more approachable field, and immensely lucrative. Get yourself a world-class broker by your side, and surf through the risks all the way to profits! Call WesternFX today and hire from our team of stellar brokers. We will equip you with impeccable strategies, both to monitor risks and reel in the profits. Avail our brokerage, and dominate Forex trading in Malaysia!