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Forex risk management comprises individual actions that allow traders to protect against the downside of a trade. More risk means higher chance of sizeable returns – but also a greater chance of significant losses.
Therefore, being able to manage the levels of risk to minimize loss, while maximizing gains, is a key skill for any trader to have.
How does a trader do this? Risk management can include establishing the correct position size, setting stop losses, and controlling emotions when entering and exiting positions.
Implemented well, these measures can prove to be the difference between profitable trading and losing it all.
FIVE FUNDAMENTALS OF FOREX RISK MANAGEMENT
1. Appetite for Risk
Working out your appetite for risk is central to proper forex risk management. Traders should ask: How much am I willing to lose in a single trade?
This is particularly important for the most volatile currency pairs , such as certain emerging market currencies .
Also, liquidity in forex trading is a factor that affects risk management, as less liquid currency pairs may mean it is harder to enter and exit positions at the price you want.
If you don’t know how much you are comfortable with losing, your position size may end up too high, resulting in losses that may affect your ability to take on the next trade – or worse.
Let’s say 50% of your trades are winners. In the long term, mathematically you can expect to have runs of multiple losing trades in a row.
Over a trading career of 10,000 trades, the odds suggest that you will face 13 sequential losses at some point.
This underlines the importance of knowing your appetite for risk, as you need to be prepared, with sufficient money on your account, for when bad runs hit.
So how much should you risk? A good rule of thumb is to only risk between 1 and 3% of your account balance per trade. So, for example, if you have an account of $1,000 your risk amount would be $10 -$30.
2. Position Size
Selecting the right position size , or the number of lots you take on a trade, is important as the right size will both protect your account and maximize opportunities.
To select your position size, you need to work out your stop placement, determine your risk percentage and evaluate your pip cost and lot size.
3. Stop loss
Stop loss is very important in trading forex. A forex stop loss is a function offered by brokers to limit losses in volatile markets moving in a contrary direction to the initial trade.
This function is implemented by setting a stop loss level, a specified amount of pips away from the entry price. A stop loss can be attached to long or short trades making it a useful tool for any forex trading strategy.
Never place a trade without a stoploss. My advice
Traders should use stops and also limits to enforce a risk/reward ratio of 1:1 or higher. For 1:1, this means you are risking $1 to potentially make $1. Place a stop and a limit on each trade, ensuring that the limit is at least as far away from current market price as your stop.
4. Leverage
Leverage in forex allows traders to gain more exposure than their trading account might otherwise allow, meaning higher potential to profit, but also higher risk. Leverage should, therefore, be managed carefully.
5. Controlling Your Emotions
It’s important to be able to manage the emotions of trading when risking your money in any financial market. Letting excitement, greed, fear or boredom affect your decisions may expose you to undue risk.
To help you take your emotions out of the equation and trade objectively, maintaining a forex trading journal or log can help you refine your strategies based on prior data – and not on your feelings.
Forex trading is not a gambling or Bet Naija but a profession like, doctor, lawyer and others.
Let do little experiment.
As a worker your monthly salary is #200,000, per day work for 23 working days is #8,695 for each day.
Your daily target for a $3000 is $20 per day by 5 days is $100 by 4 weeks is $400 exchange rate is #800 (#320,000).you are making this every month. think of this
For us using The trade prop firm. You use $100 to buy $3000 account, your daily drawdown is 6% that is $180 and your monthly drawdown is 9% $270.
What Tentrade gave to you is $170 plus your $100 making it $270. Please trade wisely with a good risk management.
I see a lot of people here loading trades with big lot size, that is Gambling not trading.
In summary, to practice solid forex risk management, traders should:
1.Work out their attitude to risk, thinking about risk/reward ratio, position size, and percentage of account balance for each trade
2. Place stop losses to protect against the market going against their position
3. Be wary of leverage and using too much
4. Keep a handle on emotions
5. Use a journal to make decisions based on existing data rather than personal feelings.
Posted : 05/08/2023 5:01 pm
WHAT IS COPY TRADING IN FOREX MARKET?
COPY TRADING is trading system that enables individuals in the financial markets to automatically copy positions opened and managed by other selected individuals
The investor have the total write on his account.
The investor should determines the lot size that the trader should use.
The investor does the deposit and the withdrawal
The investor has the right to monitors the trade history
The investor has the write to disconnect or withdraw his account at anytime.
The profit is shared between the investor and the trader as agreed
The investor should understand the risk in the trading market
The investor should not invest any money or amount that he/she cannot loose or risk.
We have over 1000 trading bots in the market, no one is ever permanent or 100% successful in the trading history.
If you cannot kill fear you can never make profit in the forex market.
If you cannot kill greediness, you can never succeed in forex
If you don't follow the basic rules of trading ( risk management and financial behavior), you can never succeed in forex market.
NOTE THIS.
Never allow a single trade to take more than 3% of your carpital.
It is not all about the profit, but is about your entering and exit position in a trade.
Learn to build yourself/knowledge on a market than to try trading on all the markets.
Remember, Jack of all trades, is a master of none.
Without taking risk, you can never amount to anything in life.
Wish you a financial freedom destiny as you take the bold step into FX
Posted : 18/08/2023 1:05 pm
WHAT IS FOREX MARKET:
What is forex? Quite plainly, it’s the global financial market where people trade currencies. If you think a currency will be stronger than the other, and you take a position that validates your thinking, then you can make a profit.
If you’ve ever gone to another country, you normally had to find a currency exchange station at the airport, and then swap the money you have in your wallet into the currency of the country you are visiting.
Then you notice the screen with exchange rates for different currencies. An exchange rate is the relative price of two currencies from two separate nations.
You exchange your dollars for Swiss francs and, when you do this, you’ve effectively joined the forex market.
You’ve swapped one currency for another — or in forex trading terms, assuming you’re an American visiting Switzerland, you’ve sold dollars and bought Swiss francs.
Before you fly home, you visit the currency exchange booth to swap the Swiss francs that you have left and notice the exchange rates have shifted.
These are the fluctuations in the exchange rates that may mean profit (or loss) in the foreign exchange market.
What is Forex?
The foreign exchange market, also known as “forex” or “FX,” is the largest financial market in the world. It’s a global, decentralized market where the world’s currencies change hands. Exchange rates change constantly so the market is always fluid.
International trade and tourism, like the airport example above, account for a very small percentage of transactions in the FX market.
Instead, most of the currency transactions that take place in the global foreign exchange market are bought (and sold) by traders and speculators.
Currency traders buy currencies anticipating that they can sell them at a higher price in the future.
Forex Market vs. the New York Stock Exchange
The New York Stock Exchange (NYSE), on average, has a daily trading volume of $2-6 billion. Sounds like a lot, right?
But the foreign exchange market dwarfs that volume with its $5-6 trillion a day trade volume — trillion with a “t”.
Although you hear about the NYSE in business and financial news every day, if you actually compare it to the forex market, it looks like this…
what is forex
Trading Volume
Both Nasdaq and the NYSE look so tiny contrasted with the forex market. The currency market is over 200x larger. However, that large $5-6 trillion figure covers the entire global foreign exchange market.
The “spot” market — which is the element of the currency market that’s relevant to most forex traders — is lesser at $2 trillion per day. And then, if you count just the daily trading volume from retail traders, it’s even smaller.
It is very tricky to establish the precise size of the retail FX market, but it’s assessed to be around 3-5% of total daily FX trading volumes, or around $200-300 billion — maybe less.
So, the forex market is definitely massive but not as massive as you might believe, at first glance.
Aside from its magnitude, the FX market also seldom closes. It’s open practically round the clock. The forex market is open 24 hours a day, 5 days a week — only closing during the weekend.
The forex market does NOT close at the end of each business day, unlike the stock or bond markets. Instead, trading just shifts to various financial markets around the world
Posted : 21/08/2023 11:20 am
WHAT IS SYNTHETIC INDICE/FX TRADING
Synthetic indices are becoming increasingly popular among traders throughout the world. However, there are still some misconceptions about them, which we will address in this piece.
Synthetic indices are a type of index that is created by combining data from different sources. The purpose of this article is to assist you in understanding synthetic indices.
Internet trading has simplified the investing procedure, and it is expected to become more prevalent shortly. We no longer have to spend enormous money only to acquire access to a massive trading floor.
The instant availability of information provided by the internet’s top sources has made it feasible to trade even unpredictable new events from the comfort of one’s own home.
However, these developments have also altered the trading instruments that are most frequently employed.
So, for your feasibility, we have put together a guide to synthetic indices pip calculator. So, let us get towards it!
What Is/Are Synthetic Indices & How Do They Work?
Simulated trading instruments that imitate or reflect the behavior of real-world financial markets are referred to as synthetic indexes. Because these are simulated markets, you may be wondering: what are they like?
What Factors Influence The Movement Of Synthetic Indices?
Synthetic indices move by employing a random number generator to generate new integers.
Cryptographically secure computer software generates random numbers. The broker cannot influence or forecast which numbers will be generated to maintain transparency in the trading process.
Exactly like in real-world financial markets where the broker has no effect over price movements, this is true in virtual financial markets.
A third-party audit is performed on the random number generator used to change the volatility index charts to guarantee that the results are accurate and consistent.
Types Of Synthetic Indices Trading
Synthetic indices trading is divided into six categories, each of which has its trading platform. These are the ones:
Volatility Indices
Continuous Indices
The Step Index
Range Break Indices.
Daily Reset Indices
Crash & Boom Indices
Advantages Of Synthetic Indices Trading
Some of you are still perplexed as to why we should trade synthetic indices rather than the actual thing.
Here are some advantages of synthetic indices trading that will dispel any reservations you may have.
Important fundamentals, such as the announcement of an increase in the federal funds rate, do not affect synthetic indices.
They are accessible for business 24 hours a day, seven days a week.
Synthetic Indices, as opposed to FX pairs, have the same level of volatility.
Synthetic Indices offers extremely low spreads, as low as one pip in some cases.
With the price action technique, you may trade Volatility Indices with relative ease.
On MT5, you may also trade cryptocurrency.
When trading synthetic indices on the MetaTrader 5 platform, there is no requirement to make a minimum deposit of any kind.
You can practice synthetic trading indices before you open your real-money account.
Disadvantages Of Synthetic Indices Trading
Having gained a thorough understanding of the advantages of synthetic indices trading, you should now consider the negatives of synthetic indices trading, which you should be aware of before proceeding further.
When compared to FX pairs, there are far less volatile indexes from which to pick to invest your funds.
Volatility indices are extremely volatile, and a single error might result in the loss of your entire account.
Volatility indices, in contrast to currency pairings, cannot be traded with a lot size of 0.01 or less.
Occasionally, following server maintenance, the previous market data for the Volatility Indices disappears and is no longer visible on the page.
The availability of synthetic indices trading 24 hours a day, seven days a week, increases the risk of overtrading.
Instructions on How to Open a Trading Account for Synthetic Indices
You must first register with a broker to be able to open synthetic indices trading account with them.
To avoid falling victim to fraudsters before choosing a broker, you must remain vigilant at all times. Numerous scammers are waiting for you to make a single error.
101investing is the greatest online broker since it offers a wide range of trading services at no additional cost or commission.
You can acquire a full assessment of a broker that will assist you in determining why you should and should not choose that broker, among other things.
Anyone can open a trading account because the process is so simple and quick. Anyone can open a trading account. The following are the procedures to take to open an account.
Fill out the enrollment form by adding the required information.
In the second step, you will provide your personal information.
Include your earnings and tax returns.
Now, upload all of the necessary paperwork.
Create an MT5 trading account at this time.
MetaTrader 5 is available for download.
Access your Metatrader 5 account by logging in with your username and password.
Make a deposit and get started
Posted : 21/08/2023 11:24 am
THIS STORY WILL HELP U!
Anytime I am facing a little discouraging situation in my FX career, I dive into the story of Jeffrey Benson and Habbie Forex, who @25 are already FX billionaire in $.
The question is, did they encounter challenges on their ways to success?
The answer is yes! Jeffrey once said, there came a time he crash one of his account worth $200,000, while Habbie once said he crash the first $5,000 that was given to him to manage. After all these triers, they continued, at last they conquered.
As you refuse the give up in your FX or Crypto journey, you will definitely succeed.
I remember in 2020, April to be precised, my first time in crypto space, I lost my #100k crypto investment within just a week. The worst was that the money was a borrowed money.
I could see myself refused to give up, after few months, with a proper guide from a mentor, I saw myself making $830 with just $90 within 24hrs.
That was the beginning of my success journey.
The quest for success kept growing. I still fell into the hands of many acclaimed crypto Dom, who led me and my oga into another session of lost, in the name of presale, not knowing what referral bonus was, leading these two innocent giants to unmerited parallels losts all because of referral benefits.
In all these, I hard never given up. This has being my major secret to success in anything I found myself doing.
In 2022, God decided to upon my chapter of blessing. I made my first $2000 with just $80.
Again, it was as if hell has vowed that I must quit the crypto space. In 2022, I saw myself loosing virtually $900 dollar into crypto currencies which we all known to be stable coins, LUNA, SOLA, and others.
I could see my $200 LUNA crash down to $0.0000001 within 12hrs.
This doesn't stop me at all.
In July 2023, the quest to diversify my source of income came up. That lead me to FX market. I could see myself making a payment of $80 to get enrolled in the apostle fortunate forex academy.
There, I met another level of discouraging situation after making the payment. We hardly see him online to attend to us. He only send videos to us to watch. He advised us to start funding and trading, that it is when we start trading that we will learn.
As at this time, I don't even know how to operate MT5.
To God alone be all the glory.
I lost my $80 dollar funded account trying to test my skill of trading on volatility 75. By then I had no knowledge of lot size at all. I lost the account in less than 1 minute. This was not enough factor to discourage me.
My greatest moment was when God connected me to a friend who took me like his brother and nutured me well till date.
I have encountered several FX traders who acclaimed themselves to be teachers or mentors, but they are good deceivers.
I have vowed to stand by truth.
Overtime I have made some profits from small or big amounts. But there is a breakthrough I am believing God for.
Friends, I tell you the truth, FX market is very good, but when the accident happened you may ask whether you don't know what you are doing.
Those who have made it, I strongly believe that it was not 100% their skills that gave them those breakthroughs, the hands of God was involved.
Never give up if at all you have started, one day people will sing your glory to the glory of almighty God.
Shalom!
Posted : 28/08/2023 7:16 pm
FOREX IS NOT A GET RICK QUICK OPPORTUNITY
Contrary to what you’ve read on many websites across the web, Forex trading is not going to take your $500 account and turn it into $100,000.
The amount we can earn is determined more by the amount of money we are risking rather than how good our strategy is. The old saying “It takes money to make money” is an accurate one, Forex trading included.
But that doesn’t mean it is not a worthwhile endeavor; after all, there are many successful Forex traders out there that trade for a living.
The difference is that they have slowly developed over time and increased their account to a level that can create sustainable income.
I hear about traders all the time 50%, 60% or 100% profit per year, or even per month, but the risk they are taking on is going to be pretty similar to the profit they are targeting.
In other words, in order to attempt to make 60% profit in a year, it's not unreasonable to see a loss of around 60% of your account in a given year.
"But MDM, I am trading with an edge, so I am not risking as much as I could potentially earn" you might say. That's a true statement if you have a strategy with a trading edge.
Your expected return should be positive, but without leverage, it is going to be a relatively tiny amount. And during times of bad luck, we can still have losing streaks. When we throw leverage into the mix, that's how traders attempt to target those excessive gains.
Which in turn is how traders can produce excessive losses. Leverage is beneficial up to point, but not when it can turn a winning strategy into a loser.
By God's grace we can never blow account again. Slow and steady win the race.
Please always trade with care and remember how ants do things little by little and still win at the war
Posted : 18/09/2023 6:01 am
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