One of the most important topics when it comes to forex trading.
Well, you are in the forex business to make money. And to make money, you have to learn how to manage your losses and eliminate the risks.
But ironically, this is one of the most neglected areas of forex trading.
Many traders are just too excited to get started and completely disregard their account size.
But there’s a term for this type of investing and SPOILER ALERT it is not called trading.
And when you gamble, you’re looking for a jackpot not a long-term return.
Just like when people go to Las Vegas to gamble their money in hopes of winning a big wad of cash…
And don’t get me wrong, even if Andrew Lockwood does win the $500,000 jackpot, the casinos know that there will be thousands of other players who won’t.
And that’s essentially how casinos manage to stay in business.
They profit from the people that don’t win.
So… how do you become the 1% of the traders that do win?
In finance, risk is defined as the potential for the actual return on investment to be lower than the expected return.
This includes the potential for loss and – if you’re trading using leverage – the potential to lose even more than you put in.
Risk management can then be defined as a set of rules and measures you can put in place to ensure the impact of getting a decision wrong is manageable.
At the end of the day, forex is a numbers game. And in order to win, you have to tilt as many factors as you can in your favour.
You want to be a part of the 1%, NOT one of the gamblers because, in the long run, it’s always better to be a consistent winner.
So how can you manage your risks properly? Keep on reading!