For many of us who currently work in the Forex business, the word “risk” has become simply a term we’ve learn to live with on daily basis. But for many others, risk is a synonym of fear, especially when it comes to money issues.
That is why we’ve decided to put together a few easy ways to reduce trading risks. The following are super fast and simple to implement and will work on basically any trading portfolio.
Leverage is tempting... we all understand that. Put $100 on your account, trade with $10,000. Crazy, right? But this powerful option has a strong downside: losses. Your positions (as always) can move up or down and by using high leverage, you can either win big or crash your balance.
Recommendation: keep your account leverage low, 1:10, 1:50 or 1:100. No more. Avoid 1:500, 1:1000 options that would only add unnecessary risks.
There is not much to interpret here: never risk more than 1% of your account on a single trade. If you follow this rule, you are setting the rules and therefore, gaining full control over your trading behavior. Does it mean you will only be trading with 1% of your account? Nope. It means you will be opening 1% trades so if any of those goes wrong, your losses are smaller.
Trading a rate hike announcement is certainly more difficult than following an usual trend pattern. If you are not a highly experienced trader, better stay away from big monetary policy announcement or unexpected events. Do as most people do, simply move to safe havens. There is nothing wrong with it plus, you might even get some profits.
Setting Stop Loss orders at wrong levels actually increases your risks. Why? Because there are more chances your position will be closed unnecessarily, leaving you totally empty handed. You can afford to lose a bit, do not set your SL orders too close, let your position breathe.
And of course… Stay up to date. Not the first time we emphasize on this matter. Reading blogs, finding reliable sources of information, watching the news, it all will contribute to a better, less riskier trading activity. Don’t be lazy. It will pay out soon.
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