Every forex trader wants a low risk, and a high return in trade. This might seem impossible as the forex market is very unpredictable, but there are few techniques that forex traders use to reduce a risk of losing money.
Before opening a trading position, it is important to determine the risk and the reward in a particular trade. How much money is one trader willing to risk in order to gain profit? Well, there is not a written rule of how much should be risked, but a reward to risk ratio of 1.5 is sustainable in the long run. This means, a 50% more reward than risk. For every $1 of risk, your reward is $1.50.
There are some occasions when the forex market is very volatile, and it is okay to stay out of trading when traders aren’t sure about their predictions. Many newbies don’t consider this option as they want to have continuous trades, which is not always a good idea. If you want to manage risk you should stay away when it seems uncomfortable to trade, and you can open positions as soon as you assess the market. You are in control and should always take care to trade responsibly.
Another strategy which is commonly used for reducing risk is a stop-loss option which allows traders to manage their risk and rewards. Here you can read more about stop-loss *link*.
Unsuccessful traders often enter a trade without having any idea of the points at which they will sell at a profit or a loss. Like gamblers on a lucky—or unlucky streak—emotions begin to take over and dictate their trades. Losses often provoke people to hold on and hope to make their money back, while profits can tempt traders to incautiously hold on for even more gains. It is really important to know when to exit and don’t lose control of emotions.
The best way to maintain low risk in your forex trading is to keep your leverage reasonable, stay focused on your goals and not let stress or greed dictate your trading decisions. With these golden keys, your low-risk strategy should bring solid results over a long trading career.