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    Thread: How do you apply proper risk management?

    1. #11
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      To apply proper risk management in my everyday trading I do the following:-
      • My each trade don't exceed above 5% of my total capital.
      • I don't enter market when high impact news is due or too much volatile.
      • I always try to make sure that my setup is ready to enter the market so that i don't have to rush the market and over-trade.
      • I give money management first priority because it's what keeps me in the market.
      • Overall, application of proper risk management does not develop in one day. If you can stick to it you will be able to master it.
      Yesterday's wins and losses are yesterday's wins and losses -- and the yesterdays are gone


    2. The following 2 users say Thank You to forexaddict for this useful post.

      mikehenley (05-08-2018), Unregistered (1)

    3. #12
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      The profitability of any business can be realized only when the risks involved are properly managed. It is the reasons why all risks are expected to be properly evaluated and necessary precautions and measures are made for the purpose of optimization.
      Risks involved can be categorized in to capital and emotions. The management of these risks for a trader requires adequate knowledge and itís application in the areas of technical analysis, fundamental analysis and the psychology of trading.

      Technical Analysis involves the use of different chart patterns (Candlestick formation, Line charts), Price action, Double top and bottom, Triple top and bottom ,Head and Shoulders, Inverse Head and Shoulders, Ascending triangles and so on so forth to mention but few. In addition to the price action and chart patterns there is a need for the understanding and the effective use of different types of indicators (whether on the main chart or the indicator window). The indicators are in different categories viz Trend, Momentum, Volume and custom ones.
      Combination of these ones help the trader ascertain the direction and place the right trade at every point in time
      Fundamental analysis has to do with news and happenings in different countries in question as they have to do with various relevant currencies and pairs .There are various news with different impact (high, medium and low) such as Non farm payroll (NFP), Bank Interest rates, Unemployment change, Housing, Crude oil inventories and so on and so forth. At the every brokersí site there are calendars for all these and various websites who have education and enough information on all these such as ***********, daily**, ************ etc
      Demo trading- a trader needs to develop a personal (workable) strategy which it is advisable to know how well the strategy will stand the test of time by demo trading. In this case a demo account has to be opened and be used till the strategy produces profits consistently. This may take months but it is all worth it
      Trading journal- a very good habit that a trader needs is to have a trading plan at every point in time. The plan should contain the pairs or the currency to be traded, the strategy (and the conditions attached), the expected outcome and at the end the actual outcome. All these should be reviewed (evaluation and reevaluation) to be able to have a better future projection
      Practice on continual basis-Practice definitely leads to improvement in any area of life. It is for this reason that even after live account must have been opened a trader needs to continue working on more strategies which should be well tested before using it on live account and the style for controlling greed that must have been cultivated is expected to be applied
      Without controversy, one of the greatest challenges of trading has to do with greed and along the line a trader wanting to get rich quick end up using unreasonable high lot sizes, overtrading which at the end of the day this may lead to failure and frustrations.
      Technically it is advisable that a trader needs not to use more than five percent of the available capital with stop loss of 50 pips. This implies that a trader will need to lose up to 40 trades before his or capital may totally wiped out
      Balancing up the aforementioned set of knowledge and itís application will translate to proper and effective risk management of capital and emotions


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      Tarikul Islam (05-23-2018)

    5. #13
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      My trading style and risk management is somewhat different because i just love to trade with high lotsize and have a small pips protection but i am having always a plan in mind and that is at what position i will get out from the market in the odd situation ,its not that i will wait till the margin call but i feel max traders should trade with low risk with 2-4% risk per trade order ,its the safest of all and specially the newbies should adopt the strategy because from first without experience and knowledge ,if we just jump into the market with high lotsize ,your trading account can be blown in a short span of time .

      We have to keep in mind that the risk should be taken in such a way where we can make profit as well as proper protection of the trading account is being maintained as with high risk its a shortlived thing .


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      Honey Bee (09-25-2018)

    7. #14
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      How do you apply proper risk management?
      Risk management is the key to survive in this volatile market. Basically you can't prosper in Forex market without if you don't have an effective risk management. Using stop loss and take profit is the primary elements of risk management. It will help you to ensure calculated profit or well judged loss. You must apply this stop loss and take profit in your every trade. Using calculated lot size is also important for reducing risk. Without using small lot size you can't survive in the market for a long time. It's an art. You have to grave it correctly if you wanna become a good trader. Using big lots in small account is just like suicide. Copying other trader's strategy should also been avoided. In every step you should have a good trading plan. You should know that what are you going to do next. Remember Forex success depends on effective risk management.


    8. The following 2 users say Thank You to Interlock for this useful post.

      Honey Bee (09-25-2018), Tarikul Islam (05-23-2018)

    9. #15
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      The essence of this is risk management that should be known and carried out by every trader who wants to succeed in trading activities. In this case too, there are several factors that are still under the control of a trader, namely:

      Capital, which is the nominal amount of money invested in a forex account.
      Account Type, which is the type of account opened by the trader at the broker (Standard - 100,000 units or Mini - 10,000 units).
      Lot size, namely the number of lots transacted.
      Frequency, which is how often a trader makes a transaction.
      Risk Exposure, which is how much capital is brave at every transaction.
      By knowing and setting the parameters above, the trader can find out how much risk each trading is and how long the trader can survive even the worst conditions.


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    11. #16
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      Risk management is very important for Forex trade because Forex is a business and every trader need to deposit in here. Though every trader need to deposit in here so at first he should manage his risk than try to makes profit. Now I try to say how can a trader can proper risk management in Forex.

      - At first a trader need know all knowledge of Forex, some good trading strategy for trade in right way because all wrong entry are very risk for account.

      - Than a trader should achieve proper knowledge of money management and proper use it in his lot size. Because lot size can control a trader risk in Forex.

      - Control emotion on trade because after get loss in Forex a trader be emotional and try to recover his loss quickly and start trade with big lot and finally he loss his all capital. So never be emotional on trading.
      - Avoid over trading and only trade in right entry point and exit trade on right entry point with loss or profit.

      Finally we can say it risk management is very important in Forex and a trader can manage his risk in Forex by makes a expert trader,follow proper money management,avoid over trade etc. I think this the right way for control risk management in Forex.


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    13. #17
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      The issue of good money management is very important if you ever desires to become a better and profitable forex trader, but it is really unfortunate that so many newbies over look it and do not want to learn the idea of using appropriate or adequate risk management in all their trading activities which always leads to blowing out their trading accounts in no distant time.

      So in order to apply proper money management then you should always make use of adequate trading lot and never you risk more than 5% of your total trading accounts in one trade, because that is the only way to make sure that you last in this trading business and even become a consistently profitable trader too. Over the years I have come to understand that the backbone of successful forex trading is really through good money management.
      Wisdom Is The Ability To Apply Knowledge And Experience To Any Given Situation.
      If you do not take control of your risks then you lose control of your trades


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    15. #18
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      How do you apply proper risk management?
      Applying a proper risk management is absolutely very important when it comes to Forex trading market, there are some important steps we have to tale if we must apply a good risk management.
      1. getting rid of the thought of getting rich quick in the forex market: we can become rich in the forex trading market, but it must not be overnight, and if we are trading based on this its likely we will trade recklessly and mismanage our risk
      2. have a plan: many may think this is irrelevant, but to me its very much relevant. because a trader with good plan in the Forex trading market will surely be focus and wouldn't do any thing that will jeopardize their goals
      3. have a good risk/reward : a good risk reward will enable us to open trade of little risk and make decent profit from such trade.


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    17. #19
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      We could apply proper risk management when we first understand that whatever action we take in the forex market will bounce back to us either as a profit or as a loss, these are the steps to take:

      - Be Conscious of your account balance:
      the risk that you take will directly affect your account by either increasing it or act as a reduction mechanism, having this in your consciousness will help you to mind the way you trade.
      - Every Signal is not for You:
      some trades cannot be taken because you were too busy or maybe you were even offline as at the time it came, just keep your calm and look for something else to trade, this will help to manage your risks effectively
      - Don't Chase Trades:
      this is a follow up of the above, when it is clear that you missed an opportunity that could have made you profits, please never chase the market to catch up, you will lose more this way.


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    20. #20
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      We can makes a proper plan and follow the risk management in our real trading account Forex is a risky business but if we can enter will proper planing and set our account how much we can take risk or earn daily or weekly profit, first we can set our percentage how much we can earn monthly then we can follow our planing and test our strategy in demo practice account, it will be the best practice account we can test our strategy and indicators or test everything in demo then we can apply it in real account and increase our profit, proper risk management and follow the rules will give us proper idea of making long term profit in forex business.


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