How to minimize Forex risks and get profit?
All traders feel safe only when they are confident in their scheme. However, it is difficult to build this scheme on your own, especially for novice traders. In this article, we will consider the ways to develop a trading plan to maximally secure finances and remain profitable.
Forex risk management is based on four main factors:
- trader’s reaction rate to the downward market dynamics;
- analytical approach to forecasting the degree of transaction risk;
- delineation of permissible and unacceptable dangers;
- elimination of unjustified dangers due to clear planning of actions.
What is a trading plan?
It is a source to understand the market situation and easily make decisions. In the absence of a plan, the trader makes random transactions and turns trading into roulette. Every trader is required to keep 4 documents:
- Trading strategy.
- Rules for entering into a transaction.
- Money management.
- Trading plan.
How to start Forex trade from home?
If you are new to Forex, it would be wise to use professional support and financier’s assistance. This is exactly what Capital Markets company offers. We educate and provide all necessary software and tools to our customers to help them trade independently and with no mediators.
The key rules for Forex risk minimization:
Invest in most stable currency. It is advisable that the currency pair you have chosen is familiar to you. If you invest in two currencies at once, then you are not increasing the chance for earning money but double the risk of losing your money. Add positions only to uncorrelated currencies, or to negatively correlated currencies.
Take Profit and Stop Loss: what you need to know
Take profit – is a price value for automatic transaction closure. In this case revenue will be recorded, because it is also called the level of profit-taking.
Stop loss – is a tool for fixing a deal that achieved a certain price level. The only difference from the Take Profit is that Stop Loss is used to minimize the losses of the trader and ensure financial market security.
These instruments can also be used for Forex risk management.