HOW TO USE RISK MANAGEMENTS IN FOREX TRADING

Risks management refers to the proper way of trading foreign currency by reducing losses and maximizing profit. Forex trading involve losses and profit. Traders always are rational, they need to maximize profit in trading. They use the following techniques in reducing losses within the trading account

SETTING STOP- LOSS/ TAKE PROFIT, this is most common technique that traders use when trading a forex pairs. Mostly it is used in the time of news. Mostly novice traders use this technique to set stop loss and take profit to manage their trading. Also this technique is used by the swingers. Swingers are the traders that hold a trade for a long time.

DIVERSIFICATION OF TRADES, this means that focusing in various currency pairs. Traders can choose to trade various pair like EUR/GBP, USD/JPY, GBP/JPY and USD/CAD. These currency pair are being traded within the same time. Diversification in the currency pair should involve also with checking the news of the currency. Currency pair with the news are not included in the trading.

NEWS ANALYSIS, before taking order, traders should analyze news to avoid uncertain movements of the market. During the news market have no specific direction. Sometimes it is better to stay away from the news

FOCUSING WITH SAME STRATEGY, mixing of the strategy can lead to the improper function of the trading. Traders are advised to focus with the same strategy since it will work better. There are so many strategies that works at different time frames and different news. For example for the price action strategy works better with long time frame, scalping works best with short timeframe and market maker works with both time frame. Traders should specify which strategy works better to achieve more in the trading. Additionally, large enough fund helps traders to manage large position to avoid fluctuations of the market.