QUOTE(adamsmiths @ Oct 28 2019, 09:47 AM)
The beginners are always forgetting the role of money management in the trading business. They are continuously looking for a profitable trade setup and executing trades without following the basic parameters of this business. Some of the traders even start to trade the market without knowing the risk factors and eventually make their financial condition much worse. To make a consistent profit from this market, you must understand the role of proper risk management policy. Forex market is very volatile in nature and it doesn’t take much time to lose your investment. Unless you trade with proper preparation, you are bound to make things worse.
There are many ways to protect your trading capital. Among them, the top four effective risk management policies are –
1. Be prepare to lose
2. Trade with the proper risk-reward ratio
3. Focus on trade management skills
4. Trade with a low leverage accountBe prepare to loseThe concept of losing trades is not all clear to the naïve traders. You can’t expect an ideal situation in the trading business since it will cost you huge losses. Developing a
balanced trading strategy is just a part of this profession. You can buy some expensive trading system from the pro traders but never think you will not lose any trade. Due to the unpredictable nature of the investment business, the traders are losing money. Does this mean, you will never make a profit in the trading business? The profit greatly depends on your strategy. If you win more trades and trade with discipline, you can expect to make a profit even after having a 60% win rate.
Trade with the proper risk-reward ratioRisk reward ratio is very crucial in trading business. At the initial stage, search for the
free Forex demo account for beginners and trade the market with different risk-reward ratio. Those who think the 1:2 risk-reward ratio is enough to secure the profit is making a big mistake. To make things easier, you must trade the market with a 1:3+ risk-reward ratio. The professional traders at Rakuten often suggest the new traders use a 1:4+ risk-reward ratio by default. It allows them to recover the loss with less hassle. And to trade with such a risk-reward ratio, you must follow the conservative trading approach.
Focus on trade management skillsFinding the trades with a high risk-reward ratio is not going to secure the profit. Many traders often close the trade too early even though everything is perfectly favoring their trades. They become frightened and close the trade with a small profit. By doing so, they are just killing the risk-reward ratio in each trade. Instead of closing the profitable trades early, you should think about riding the market trend. Learn about trailing stop loss since it will help you to ride the trend with zero risk exposure. Though the use of trailing stops requires a perfect understanding of the key support and resistance level, you can easily learn this technique by using the demo account.
Trade with a low leverage accountChoosing the right leverage for your account is very crucial. The low-end brokers often offer 1:2000 leverage and this is very lethal in trading. A small mistake can cost your entire investment. To protect the investment of the novice traders, professional brokers Rakuten never encourage high
leverage trading account. It’s better to make a small consistent profit rather than losing your entire investment. Control your green and be happy with the returns.
Stop making things complicated and try to use a balanced strategy so that you can make a profit at any market condition. If you get frustrated with your trading performance, take a small break and try to find the weakness. Resolve the problems by reading books and online free resources. But never trade the real market when you have doubts about your trading system. You have to be a confident trader to protect your capital.
The role of money management in the trading business, the beginners are always forgetting. For earning huge money they are always looking for but the major steps they didn’t follow which cause failure in their trading life. But as a trader I choose ForexOne the experienced broker who give the advance risk and money management in their platforms where I got – flexible leverage 1:500 with advance risk management policies such as – trail stop, take profit and stop loss.