managing risk

[Ara]

What are the most effective strategies for managing risk in forex trading?

 

[AlexOZ]

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]

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.

 

[jibaku]

before enter market, u have to list your target profit and loss.

 

[Chadpowell]

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!