Risk management is the most important part of the process of becoming a successful trader, especially for novice traders. They must be able to immediately adjust it so that a career in forex can last long.
According to Baby Pips, you are in the business of making money, and in order to make money, you have to learn how to manage potential losses. If you calculate risk management, your transaction can run smoothly and not fall into a puddle of errors.
It is better to trade in small amounts first, so the losses that will arise can be minimized. Additionally, you will be able to be more focus on trading analysis. Conversely, using large transactions and margins tend to make you unfocused because you are too worried about the loss.
Then, how do you calculate risk management?
First, you have to decide the amount of capital used to calculate it. For example, a trader has a trading account of $ 1,000,000 and $ 10,000. The amount of the account is different right? Well, risk management is to utilize the strength of the percent value of capital to avoid losses.
The value of the percent used is not more than 5%. Others often use 2%, 3% or 4% in one transaction.
Traders are not allowed to exceed the agreed percent value. If you are trading with a capital of 1 million dollars, the loss that can be limited is $ 20,000. This should not be ignored by any trader if they want their account to be safe.
Conversely, if you want to make more profits quickly by taking high margins and volumes, your trading automatically has a huge risk.
Whoever opens the position too large, it will certainly not last in the long run. Thus, 90% of traders will fail when they use unrealistic volumes.
The key to having a good management risk is yourself. If you never want to change and learn from mistakes, then the risk management process will never happen.
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