In forex, or in any financial market really, there is always an element of risk. After all, it is the very basis for trading. What you are doing is analyzing the future price of an asset, and hope you are right. There are no sure things, and risk is always present. However, you can always make sure to minimize the risk you face by taking a few precautionary measures. The idea is to restrict your losses by as much as is possible. Here are just a few essential tips for this.
What your risk capital is
Of course, it goes without saying, find out the risk for any particular target. The main idea is to balance your risk for any potential profits. In whichever situation, if the risk is too much, it’s best not to go with the trade. No matter how great the profit could be. In fact, the greater the potential profit, often, the greater the potential loss. This is why we recommend a maximum of 2 percent of profits on each of your trades.
Get a reachable target
As we said, as a general rule, aim low. No one is forcing you to trade high. Recognize what your probable profit could be, and stick to a low outlook. This goes especially to beginners, as they have to realize they do not have the knowledge to find a sure thing.
Your lot sizes
In addition to the amount of money you put in, think of the lot size you invest into. This means the quantity of the assets you buy, e.g. number of shares. This will make things easier and more manageable. You have a better chance of selling all your portions of a particular asset when the time comes. Otherwise, it could be hard to convince people to take what you are giving them.
There are just a few tips we have for you. There will be plenty more to come around in the next article.