5 WAYS TO LIMIT THE RISK OF FOREX TRADING THAT ARE STILL FREQUENTLY FORGOTTEN

Forex trading is one of the most popular forms of investment in the world, especially amongst young people. It is relatively low-cost, available 24 hours a day, and can be accessed from both mobile devices and computers. Anyone with a mobile phone and 10 dollars to spare can get involved.

But Forex trading is high-risk speculation and 60-90% of traders will lose money, depending on their Forex broker. Most traders lose money because they haven‘t created (or don’t follow) a risk-management strategy that keeps losses to a minimum.

We all know that some Forex traders get to learn how to apply risk management principles. But when they open the trading platform, there are things that cause traders to get dissolved in the market so they forget to limit risk. Usually traders are too focused on trying to grab a few pips. Even though risk management is the key to optimizing the profitability of forex trading.

So, through this article, let us convey five easy ways that traders can limit their risks when trading forex.

1. Make sure your order position is not wrong

Since the meta trader 4 platform came into existence, forex traders around the world have enjoyed the ease of executing trading positions. Ironically, because it's too easy, it also increases the chance of an incorrect position order. It's useless to have a mature trading plan if the position orders are not entered correctly.

In May 2010, there was great chaos in the financial markets due to the “fat finger” incident. A trader at a large trading firm mistakenly sold a futures contract that should have been only $16 million for $16 billion. Other traders who saw the order thought something big was about to happen, so they sold too. This resulted in a collective intraday decline of $1 trillion in the US equity market. As a result, the company and its shareholders lost a lot of money.

That's why you need to check your orders multiple times, ensuring that you haven't made any costly mistakes. Include this in your trading routine, yet it doesn't take much time to do it either.

2. Trading with a Plan, Not Emotions

Both beginners and professionals needs to plan how to trades first, traders are taught about the importance of having a trading plan or trading plan. But not all novice traders actually have a trading plan. They trade by relying on emotions and enter the market without thinking rationally. Don't follow them. You must have a plan about where to enter and exit positions. Thus, you can limit the emotional reactions that may occur when you still have a trading position.

3. Locking Profits from Winning Trades

Learning to take Profit before continuing trading is Another way of risk management, that is often overlooked by taking a portion of profits while holding a floating profit position. Some traders may be tempted to follow the trend with full positions until they reach a profit target, but removing some positions will limit the potential risk that will occur in your trading positions. The saying goes “the trend is your friend” but that only applies until the trend ends, right？ If you take some profit from your position midway, you can at least get a small win even if the trend reverses suddenly.

4. Take a Step Back from Temporary Trading

Trading is not all time win game, you lose and you win sometimes, But How do you know when you need to step away from the market for a while？ The simple answer is when your fundamental and technical analysis is wrong more often than right. You need to take a break from trading, especially after you've been in more emotional positions. By taking a break for a while, you can review and see the big picture of the market and chart patterns from a new angle.

Sometimes, taking a break will help you realize the mistake you made from the last trading position. So, take a step back, try to resist the temptation for a while. Next time you will most likely come back with a fresh mind and a new and improved trading plan.

5. Withdraw Regularly

Often there is overconfidence in traders who have just managed to book billions of dollars from a capital of several thousand dollars. However, keep withdrawing your money regularly. Why？ First, usually increased capital will make you make wrong trading decisions, for example trading with a larger position or overtrading. One of the best ways to limit risk is to withdraw some of your money. After all, forex traders need to remind themselves that to make consistent profits, we must focus on the process, not on profits. So, make withdrawals from your hard work, and enjoy the money with your partner or family.