managing risk

AlexOZ

Trader
Apr 22, 2023
59
9
14
72
Great question and very important. Unfortunately there isn't a most effective but a number of good approaches. For me the bottom line is to avoid the runaway loss ending with a margin call. For most brokers that means a loss of 50% of your account balance. So a $10,000 account can become $5000 in a very short time (dinner with friends; picking up children from school; walk in the park; or overnight sleep). So, for me a stop loss order is mandatory for every trade. I set the stop loss according to the trading conditions, where a trade is irrevocably lost. The ATR indicator is popular for this. Then I calculate a trade size to risk a small proportion of the account balance only (1% is popular). That's a complicated calculation often involving three currencies. Luckily there are web site calculators to help and trading software apps. Just do a search. Finally think about two extra features - trailing stop losses and scaling out as ways of reducing risk during the trade. Hope that helps.
 

Ara

Active Trader
Apr 24, 2023
126
21
29
34
Back in the day, I used to only trust stop loss orders as my main way to manage risk, without really thinking about other important things that can affect how my trades turn out.
 

Chadpowell

Trader
Apr 8, 2023
84
21
24
New York
What are the most effective strategies for managing risk in forex trading?
Well, I think that starts before entering a trade!
You have to be knowledgeable enough to set the correct SL and TP.
Also, you do not have to change them while you are in a trade based on your fear or greed!
Also calculate spreads when you are setting your SL and TP, unless they will be your enemies!