How to Limit your Risk while Trading?
No matter what method of trading, traders use, and what strategies they follow they should constantly be paying close attention to the money they are spending and the risk they have for losing that money. This can happen though one main thing which many traders choose to ignore; Cutting losses.
It’s easy to get excited with an open position and keep it open because it is gaining profits or because it could possibly gain profits, so excited that when thing take a turn for the worst you are still convinced you have a chance for profit.
But cutting losing trades before they drain all your position is the biggest struggle traders have, especially at the beginning of entering the world of Forex. Leaving a losing trade is a win on its own because you save more losses, but it’s much easier said than done. And for many actually leaving a trade is emotionally hard as they truly they believe they have a shot at winning.
It is always said that 90 percent of all traders fail at Forex Trading; the number is so high because traders don’t how to keep their losses to a minimum, which is one of the most important things to learn in Forex trading. Developing a Forex strategy should revolve around minimizing losses and keeping losses small usually refers to the overall number of money lost rather than how many trades lost. Because if you lose 100 dollars in 10 positions in a row, it is just the same as loosing 100 dollars on 20 positions. What matters is the money you are losing or making, and you need to learn to utilize your initial funds and trades in a manner that saves you the most money.
Learning how to manage risk and money is something you learn with time and experience, as you make some mistakes and fix them, and realize where your money is being mainly lost. But you should always start off with an initial plan that will help you manage your money right and use it in the right way to save the most possible for yourself.
No matter what method of trading, traders use, and what strategies they follow they should constantly be paying close attention to the money they are spending and the risk they have for losing that money. This can happen though one main thing which many traders choose to ignore; Cutting losses.
It’s easy to get excited with an open position and keep it open because it is gaining profits or because it could possibly gain profits, so excited that when thing take a turn for the worst you are still convinced you have a chance for profit.
But cutting losing trades before they drain all your position is the biggest struggle traders have, especially at the beginning of entering the world of Forex. Leaving a losing trade is a win on its own because you save more losses, but it’s much easier said than done. And for many actually leaving a trade is emotionally hard as they truly they believe they have a shot at winning.
It is always said that 90 percent of all traders fail at Forex Trading; the number is so high because traders don’t how to keep their losses to a minimum, which is one of the most important things to learn in Forex trading. Developing a Forex strategy should revolve around minimizing losses and keeping losses small usually refers to the overall number of money lost rather than how many trades lost. Because if you lose 100 dollars in 10 positions in a row, it is just the same as loosing 100 dollars on 20 positions. What matters is the money you are losing or making, and you need to learn to utilize your initial funds and trades in a manner that saves you the most money.
Learning how to manage risk and money is something you learn with time and experience, as you make some mistakes and fix them, and realize where your money is being mainly lost. But you should always start off with an initial plan that will help you manage your money right and use it in the right way to save the most possible for yourself.