How to Manage Your Forex Trades - Forex Risk Management

Have you ever wondered why winning trades often become losing trades?  You should because that is the most common problem with Forex traders and forex risk management. And it is likely to continue happening if you are not managing your forex trades according to the rules.

What most traders fail to understand is that there is no way that you can buy at the lowest price or sell at the highest price. No one knows how the market will behave. One news flash can change the entire scenario: a huge profit can get wiped off in seconds.

The basic mistake that most traders make is that they want to take all of their profit at once, which is not the right way to trade as it increases the risk of losing your capital. It is better explained this way.

When a trade starts getting profitable many traders will keep on gazing at the screen and reveling at the thought of having made money. They forget that it is only a price that they are seeing on the screen and not actually a profit that they can take home. Actually, at that time they should be planning to put a strategy in place to exit the trade fully or partially. The problem is aggravated when they see the profits slipping. 

Even at this point many traders fail to focus on taking profits and they remain in the trade even longer in the misplaced hope that the price will again move up. That is a direct invitation to losing money. Just realize that had you a target in mind you could have easily gone home with a substantial profit.

What actually lets you down is GREED. It is GREED that makes you lose sight of why you are in Forex trading. Your basic purpose is not to make profits only; it is also managing the risk. It is only learning the right strategies that allow you to maximize gains and minimize risks.

Again, maximizing gains does not mean that you have to exit at the absolute TOP. Believe it that it is not always possible. Maximizing gains means that for the duration of the trade you should stick to a set of rules and exit accordingly. Waiting for exiting at the TOP is futile because nobody knows what the top is. And for that matter, what the bottom is.

Your primary duty is to protect your capital and putting the initial stop loss is not the end of it. You have to manage stop losses during the duration of the trade. When the trade shows an upward trend that is the time to protect your capital and also make profits.

Make profits but never lose sight of the risk. This video will tell you how it is done:

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