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    Thread: How can a trader apply a good risk management strategy?

    1. #11
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      i would say a good risk management strategy would bother on the use of the golden rule: applying 1% to 2% of ones trading funds in the real trading. the forex business is pretty risky, no doubt about that. the forex trader, however, could limit the risk by applying the money management policy where only a little part of the funds in the account is exposed to the uncertainty in the market.

      when the trader has decided on the amount to risk, he now would apply same in calculating his lot size. this also will involve the number of pips to use as stop loss. so a good risk management must have a stop loss set in place. there should also be a decent reward for each risk taken.
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    4. #12
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      A trader needs to get the risks involved right which are capital and emotions.
      In terms of capital it is advisable that a trader does not use more than 5% of the available capital at a time with the stop loss of 50 pips and probably the same take profit. Depending on the type of trader that he is (A Scalper, A Short term trader or a long term trader) which will determine how many trades per day or per week or whatsoever as it may be applicable.
      In terms of emotions he needs to come to a good understanding of the psychology of trading so that he does not overtrade, keeps his trading journal and with discipline he should stick to whatsoever is written in the journal


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      How can a trader apply a good risk management strategy?
      It's an easy process. Firstly, set up a risk and reward ratio. Suppose, you are going to apply 1:3 risk and reward ratio. It means that you will set up a stop loss in trade for 50 pips and your take profit is 150 pips. If your lot size is $0.10 that means your stop loss target is $5 and take profit target is $15.

      If you use 1:2 risk reward ratio then for that same risk, if your trade touched stop loss then you will loss $5 and for take profit you will get $10. It's a simple calculation. Apply this strategy in demo account first. If you can become used to on that risk/reward ratio then it will be easy for you to apply in live account.

      A strong and strict money management is mandatory to being a Forex trader. Take advice from your senior about that issue. Taking high risk in small capital account is like as committed suicide. Forex trading is simple if you could manage good risk management.


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      Risk management is very important in Forex. Because without control risk and loss can't possible get success in forex. So every trader can control his risk by follow some simple step whose are below down

      - First time a trader should try to makes a expert trader and try to find out a right way of trade.
      - Than a trader should use small leverage or avoid it.
      - A trader should always control his emotion on trading never be emotional with his trade.
      - Follow the proper money management never take risk above 5% of all capital.
      - A trader should always avoid over trade and wait for right entry.

      If a trader can do this all work of above so he can easily control his risk and loss and he can get success. I think this the right way for risk management in forex.


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      Good risk management strategy depends upon the individual trader how they can trade and trade the calculative risk as per their trading capability because the risk level always depends as per the experience and the confidence of us ,how we can deal with the market conditions and save our trading accounts from blowing up .The proper calculation of the pips risk and the usage of good stoploss can save our account from the margin call .Its all about the understanding of the market as we have to react with the situation and should take the perfect step so that we can save our equity from the damage .

      What i personally think is that we should show the patience and should have the proper control over the entire trading plan upto the desired target we make because if we are off track from the concentration ,our whole trading strategy will fail for sure.


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      A risk management is extremely important when it comes to money management, so to apply a risk management.
      The first thing is to have a good risk reward ratio for our trading. With good reputation we will be able to have a balance trading.

      For example : if we have have a 100$ trading capital it as important that we stick to the use of 0.01 lot size to reduce our risk. Moving forward! Then we will determine our risk which is our stop loss, maybe at 50 pips and of we are using rr of 1:3 then our reward (take profit ) will be at 150 pips if it's 1:2 the reward will be 100 pips.

      In this explanation even if we lost 5 trade out of 10 trades we will still be in good profits. All we just gave to do is make sure we are opening good trades.


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    10. #17
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      There are many ways to manage or reduce risk in forex. One traders should take risk management strategy is to take notes. Traders should keep a trading journal that pinpoints your mistakes and the cause of your mistakes. They should go over your notes everyday to remind you of thier mistakes. Another risk management strategy is that traders should also develop a trading plan. A trading plan defines how, when and why your trading should be done. The third risk management strategy is choosing correct lot sizes. Traders can find accurate lot sizes using the position size calculator. Trading with high lots with little experience can lead to losses. The fourth risk management strategy is using stop losses. To limit losses and maintain leverage, traders usually use stop losses and limit orders. The fifth risk managemnt strategy is that traders should limit leverage. A rule in forex is that the greater amount of leverage used, the greater the volatility in the account. The smaller amount of leverage use, the smaller the volatility. Trades that use less than 10 times leverage are usually smaller and safer. For an amateur trader, it is best to experiment with different degrees of leverage in a demo account until you find the amount that meets your needs. This prevents overtrading. Leverage is not fixed in trading. Many brokers would start out at the 100-500: 1 leverage. Most brokers use the 100:1 leverage ratio. It is the most popular.It can go as high as 1000:1 leverage but is a rare condition. The fourth risk management strategy is to learn as much as possible with forex and practice. Traders can learn at forex schools, with a mentor or research the internet. Traders should have access to fundamental and technical analysis tools and information. It is also important to practice on a demo account for atleast six months until you are mastered in forex.


    11. #18
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      How can a trader apply a good risk management strategy?Applying a good risk management strategy will depend on choice of individual trader. The essence of risk management strategy is to protect your capital .The use of tools like S/L and T/P can be very useful in risk management.Another method of risk management strategy is by introducing sound money management .Here ,you decide the percentage of your total capital that you can risk at once .The golden rule is 2% calculated risk at once . Depending on individual trader, it could be less .For example ,a trader with $1000 account stands to loose $20 if per adventure the market moves against him and hit S/L . Inability to apply these risk management strategy appropriately will expose your account to unwanted margin call. Hence ,it is advisable to always consider the risk involved while trading through checks and balances.


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      Strategy is very important to survive in Forex trading because it is full of crisis and many diffident situation. So if you want to trade successfully you must be have better strategy to take and won the risky of trading. So very common and effective strategy is that you have to take your trading steps by proper and deep analysis and you have be fully sure to take any decisions. Be patience and confident to make any kinds of decision to face any situation. If you can do so you can face any risky in Forex market and can them in your favor.


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      Apply a good risk management strategy in forex trading then the first step is you have to use low leverage in trading account. Using low leverage will reduce the risk in your trading account and it will be easier for you to manage risk. The second step is you need to consider the balance of the trading account, you need to adjust the low leverage with your balance to know the risks to be taken in trading. In this way you will be able to apply and limit the number of orders you want to open in trading so you are not careless in taking dangerous risks for your trading account. All can also depend on your money management to change risk or calculate the risk accordingly.
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