Golden Rules of Risk Management Risk management is an essential element in Forex trading and is better to absorb this simple truth and make the effort to master them, because it is one of the most important factors in successors in your management or trading.
The first question that is in the mind of the beginners is what amount can we get profits in this trading, and this is the wrong thinking that it must be: What is the amount you can lose? Here, the role of trading risk management emerges to maximize your potential gains while minimizing potential losses as well.
Trading risk management is not only related to losses, but rather defines a reasonable profit target that you should target without worrying about the stability of your portfolio, The monthly rule states that “as much risk comes profits” which It does not mean that your risk increases in greed for more profits, then your trading will turn to a gamble, but start focusing on protecting what you have and at the same time give yourself a chance to make a profit. Among the basic tools that help you find the optimal investment opportunity what is called “Sharp Ratio“, which helps investors understand the return on an investment compared the risk.
It is very necessary to choose the trading volume wisely and accurately, the golden rule for professional traders states: “Do not risk more than 1-2% of your deposit in one trade”, let’s say that we have two traders with the same initial deposit amount of $20,000, but the difference is that the first risked 2% of His balance in each trade, while the second risked 10% of his balance in each trade, If each of them loses 10 consecutive deals, the first will remain $16675, while the second will remain $7748.
Some traders modify this rule by increasing its high limit to 2% However, that’s not recommended if you are a beginner or a trader who is still building and testing his risk management strategy because the idea of setting the position size is simple: “never risk too much capital in one deal”.
It is worth noting to make sure to set the T/P points at the price you want to close your deal and take the profits, If the specified price level is not reached yet these take profit orders will not be triggered, which are very similar to stop loss orders in the sense that they allow you to close your deal when predefined conditions are met.
Finally, be a learnable trader and start building your financial future with the most trusted broker TNFX, devote more time to learning trading and market analysis, read articles and books, watch videos, participate in webinars and seminars that organized by TNFX inside and outside the country and raise the level of your capabilities.