Forex risk management is the most important thing in forex trading. As is well known that forex trading has a fairly high risk. But when you can control that risk (potential loss), then, this online business is very profitable compared to other online businesses.
Unfortunately, very few traders are aware of the importance of forex risk management, especially for novice traders. Usually, after creating an account and depositing.
These novice traders tend to be impatient and immediately press the BUY or SELL button without doing any analysis first, let alone doing risk management. The following are some of the risk management that novice traders need to understand.
Forex Risk Management by Using Cold Money When Trading
If you are a novice trader, it is mandatory to use cold money. Because the use of cold money is because you will not always be able to withdraw money or withdraw the money you are using for trading.
Therefore, if you force a trade at the wrong time, you will lose. Simply put, if you sell goods when the price is down, while you buy it when the price goes up, you will definitely lose. So, it is highly recommended to use cold money.
For information, cold money is money that is not used for sudden or urgent needs. This means that it is not money needed for daily needs, insurance, emergency funds, children's education funds, installment funds and so on.
It is also highly recommended that you use borrowed money for trading because the money is not cold money either. So all the money used for trading is intended for trading, not for other purposes.
Set Stop Loss So You Don't Lose Too Much
A stop loss order is one of the forex risk management which is an order placed to close an open transaction with the aim of limiting the risk of loss. For example, you open a forex transaction BUY 1 lot of AUD/USD at a price of 0.81400.
To limit the risk in your trading, of course you need a strategy where you will place a stop loss at 0.81000. That is, if the price then drops to 0.81000, your transaction will close at 0.81000 with a loss of $400.
In forex trading, you are legally obligated to limit risk. The key is to minimize the possibility of the stop loss being "snagged" by price movements. This is a stop loss placement technique itself.
Place your stop loss a few pips above key resistance (if your position is short) or below key support (if your position is long).
Technically, there are methods that teach placing around 100-200 pips (for 5 decimal quotes). There are many methods of determining key resistance and support, you just need to learn them.
Create a Good Trading Plan
For a forex trader, a Trading Plan is necessary to obtain consistent trading results. Discipline has become one of the most important thing you must maintain to success in forex.
Through a Trading Plan that is made correctly and objectively, a trader can certainly practice discipline according to the rules that have been set in the plan. In addition, a trader has taken responsibility for himself by making a Trading Plan.
If the trading results are not as expected or the direction of the market price movement is against the prediction, the trader can immediately take the best steps on the trading account without hesitation and panic.
You also need to consider the best forex broker so that your transactions are safe. A trusted broker must be legal and has been registered with BAPPEBTI. One of the brokers that you can choose is Didimax forex broker. You will get the best facilities, including free forex education.
With sufficient knowledge and experience, you can benefit from forex. Don't forget to always monitor your forex risk management so you don't lose money in transactions.
