#firstdealofthenewyearAKEEL Risk Management in Forex Trading Forex trading is highly volatile, so risk management is essential to protect your capital. Here are key risk management strategies: 1. Use Stop-Loss and Take-Profit Orders Stop-Loss (SL): Automatically closes a trade when a predefined loss level is reached. Prevents large losses. Take-Profit (TP): Automatically closes a trade when a predefined profit level is hit. Locks in gains. Example: If you buy EUR/USD at 1.1000, you can set: Stop-Loss at 1.0950 (-50 pips) Take-Profit at 1.1100 (+100 pips) 2. Position Sizing & Lot Management Risk only 1-2% of your account per trade. Use proper lot sizes based on your account balance. Micro Lot (0.01) = 1,000 units Mini Lot (0.1) = 10,000 units Standard Lot (1.0) = 100,000 units Example: If your account has $1,000, risking 1% ($10), you might trade 0.01 lots with a 100-pip stop-loss. 3. Risk-Reward Ratio Aim for at least a 1:2 or 1:3 ratio (risk $10 to make $20 or $30). Helps maintain profitability even with a 50% win rate. 4. Leverage Control Leverage amplifies gains and losses. Common leverage in Forex is 1:50, 1:100, or even 1:500. Use lower leverage (e.g., 1:10 to 1:50) to reduce risk. Example: With 1:100 leverage, a $100 account can control a $10,000 trade—but a small price move can wipe out your capital. 5. Diversification Trade different currency pairs instead of putting all your capital in one trade. Mix major, minor, and exotic pairs to balance risk. 6. Avoid Overtrading & Emotional Trading Stick to a trading plan and avoid revenge trading after losses. Take breaks and manage stress to avoid impulsive decisions. 7. Fundamental & Technical Analysis for Risk Management Use news events (NFP, interest rates, inflation) to avoid trading during volatile periods. Apply technical indicators (RSI, MACD, Moving Averages) to time entries and exits. #firstdealofthenewyearAKEEL