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  1. #1
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    Forex Risk Management

    Risk Management is a very important objective in Forex trading. Please reply about this one and i will really appreciate to have guideline via this forum.
    What is importance of Risk Management for the new comer.

  2. #2
    Standard Member Array vx13's Avatar
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    Risk is what you're willing to forfeit.
    I say "willing to forfeit" because what you lose in said risk is the "cost of doing business".

    Now normally we risk in terms of percentage.
    Let's take a $100 account.
    At a 2% risk of your account, you only lose $2 at max and your trade is done.
    $4 at 4%, $1 at 1%. You get the picture.

    If you're wondering how to do this with a stoploss, here's a simple formula:
    (Account Balance x Risk Percent)/Stop Loss (in terms of 5 digits) = Lots

    By in terms of five digits, I mean 12pip stop loss is 120.

    Example:
    Account: $100
    Risk: 2%
    StopLoss: 20pips

    (100 x 0.02)/200 = 0.01

    So by this equation, you would use a 0.01 lot size and with a 20pip SL, you would only lose 2% of your account.

    A key thing in risk management is comfort. Play around with the equation's variables. Namely the risk percentage or lot size. Play with it until you find a comfort level.

    The old adage is 2% at max. I believe you can get flexible with that number depending on who you are but at like 10% I will start to fear for your account

    One more thing.
    Risk to reward ratios.
    A killer win rate like 90% means jack shit when the RRR is 1:9 (reward:risk)
    Even when you win a lot, the 10% of the time you lose, the loss is killer.

    When you see successful traders, most are trend traders with high RRR because they ride long trends.

    Huge RRRs like 5:1 allow you to lose often but when you win, it basically will cancel out all the losers.
    (I'm not saying other traders like swing, tops and bottom pickers, scalpers, etc. can't be successful. They most certainly can. I'm just preaching some risk management stuff for ya )

    So in summary:
    - Big RRR so you don't have to worry about always being right
    - Use the equation to control your lot size. Your lot size controls how much you lose in a single trade and what percentage of your account that is.

    - Vx13

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  4. #3
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    Here is huge information about managing the risk involved and powerful strategy to handle it.Good post.

  5. #4
    Platinum Member Array Marchello's Avatar
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    Membership FREE is available for 3 weeks ...
    on subjects as Forex Risk Management/Money_Management .. and many many more.

    I humbly recommend .. no financial attachments .. just a very 'Avid Fan' .. sharing

    http://indo-investasi.com/showthread.php/13480-share-solomonfx

    Good trading wishes

  6. #5
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    There are no rules to risk. You can risk whatever you want, risk from 1% per trade to 5% per trade, if you like you could even treat it as a gamble and risk 50% per trade..

    Personally, I do take fairly big risks with anything I do, so for me it makes sense to use a risk in forex of 5-10% per trade

  7. #6
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    It also depends on how you trade. I do some scalping and every trade is 5% and long term 2% thanks for the ratio.

  8. #7
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    Strategies to reverse the tides of these risks are demanding for transactions to be settled in hard currency, diversification and hedging. Diversification is a Forex risk management strategy that has to be considered from time to time because it is the nature of currencies to fluctuate in a given period of time.

  9. #8
    Gold Member Array shabz's Avatar
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    Here is a nice money management indicator for MT4, on 5 digit brokers you have to add an extra zero to your stoploss. It can work directly off your account balance if you wish.
    It works out your tick value, equity risk, lot size & your $/pip value based on on your lotsize.

    http://www.4shared.com/file/PIGRVc7F/Dragon_Money_Management.html

  10. #9
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    Forex risk management can make the difference between your survival or sudden death with forex trading. You can have the best trading system in the world and still fail without proper risk management. Risk management is a combination of multiple ideas to control your trading risk. It can be limiting your trade lot size, hedging, trading only during certain hours or days, or knowing when to take losses.
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    Last edited by Mark vough; 10-07-2011 at 01:51 PM.

  11. #10
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    always use 2% - 5% for target and loss . . this is good MM. .

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