Currency Trading

Proper risk management can save your trading account

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The Forex market is enormous and it’s not easy to save your trading capital if you are not aware of the terms and aspects of the market. The main goal of traders should be to save their trading capital from the losses. You need to understand and implement good methods and strategies in the market to make profitable trades. It’s a must for all the traders to set proper risk management in the trades so they can avoid losing. In this article, you will find some points which will let you know to save your trading account by setting proper risk management.

Set the stop-loss order

Setting the stop-loss order is mandatory for traders as this acts as a barrier so traders will not lose too much money. Traders use the stop-loss order in the trades so that even if the trade goes against them they don’t lose more money. You must implant the stop-loss order to increase your chance of winning in the trades. Pro traders never avoid the stop-loss order in the trades as they are aware of its importance so if you want to make profits like pro traders make sure you set the stop-loss order.

Placing a stop in the market is an art. Without having a strong technical ability it might a tough task to place the stop at the right place. Many people in Hong Kong have lost their entire trading capital since they don’t have the skills to find the perfect stops for the trades. But this can’t be done without understanding the concept of support and resistance level.

Set a risk-reward ratio

The risk-reward ratio is another important factor traders should set before they start trading in the Forex market. The risk-reward ratio allows the traders to win more even if they lose but for that, they must know how to set the risk-reward ratio properly. You must learn and attain the knowledge to set the risk-reward properly. Make sure you set the risk-reward ratio to 1:2 so that even after losing, you can win more from the other trades. Many traders set the percentage in a higher ratio in the greed of making more profits but this only leads them to fail.

The elite traders at Saxo capital markets often trade with1:4+ RR ratio. This allows them to trade the market with more confidence. Trading with a higher risk-reward ratio improves your recovery factor and makes the trading process easier. Though it will take some time to improve your skills, you can reduce the time to learn new things by devoting to this market properly.

Position sizing

Many traders don’t pay attention to the position sizing, they assume it’s not an important term. But to save your trading account from losing more you must pay attention to the position sizing. The entering number of lots or contracts is the actual process done by the position sizing. The position size is the number of lots or contracts you are trading on each trade. To make profits in the trades you must know the proper function of the position size. The amount of money you risk on a trade is determined by the stop-loss distance combined with the position size. Once you master this technique, you won’t have to make big changes to your trading strategy.

Conclusion

All the above points help the traders to save their trading account from losing more money in the market. You must know each of the terms precisely so that you can set them to avoid losing more money. Pro traders always set them appropriately in the trades and thus they make profitable trades in the Forex market. You must understand the terms so that you can stay in the market in the long run by saving your trading account.

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