ForexEzy
No Result
View All Result
  • Home
  • Forex Education
    • Forex Basics
    • Forex Trading Strategies
    • Money Management
    • Risk Management
    • Technical Analysis
    • Fundamental Analysis
    • Trading Psychology
    • Social Trading
    • Automated Trading
  • Forex Tools
    • Forex Robots
    • Forex Indicators
    • Forex Signals
  • Top Forex Brokers
  • Top Forex Robots
  • Commentary
  • Blog
  • Home
  • Forex Education
    • Forex Basics
    • Forex Trading Strategies
    • Money Management
    • Risk Management
    • Technical Analysis
    • Fundamental Analysis
    • Trading Psychology
    • Social Trading
    • Automated Trading
  • Forex Tools
    • Forex Robots
    • Forex Indicators
    • Forex Signals
  • Top Forex Brokers
  • Top Forex Robots
  • Commentary
  • Blog
No Result
View All Result
ForexEzy
No Result
View All Result
Home Forex Education Forex Basics

10 Forex Position Management Tips

by Richard Brase
September 28, 2020
in Forex Basics
0
10 Forex Position Management Tips
0
SHARES
11
VIEWS
Share on FacebookShare on Twitter

Trading in the forex market is like riding a roller coaster. In order to work with the variances in the market, you need to be well-versed with some important trading skills and techniques. The following article covers ten crucial tips to help you stay on top of your trading strategy. 

Table of Contents

  • 1. Always Use Stop-loss
  • 2. Understand and Control Leverage
  • 3. Don’t be a Gambler 
  • 4. Use Forex Risk Management Calculator
  • 5. Set Up your Risk-Reward Ratio 
  • 6. Control Risk per Trade 
  • 7. Do Not over Trade 
  • 8. Understand Currency Correlations 
  • 9. Follow the News 
  • 10. Trading System 
  • Conclusion

1. Always Use Stop-loss

One of the most important keys for survival in forex trading is incorporating stop-losses. A  stop loss instructs the investor or the broker to buy or sell a security when it reaches a pre-set price limit. This is important for consistent trades that give you sustainable results. For instance, if you’ve purchased the currency pair EUR/USD at 1.47739 and you need the position to close when it is moving 100 pips against you, a stop order is set at 1.46739. Whether you are an experienced trader or new at the game, it is crucial to have stop losses for every trade you make as it saves you from massive losses or even profits.

2. Understand and Control Leverage

Many traders don’t understand how leverage can impact their trades. Simply put, leverage is the borrowed capital in order to receive higher potential returns. With leverage, investors can gain accessibility to a larger volume of the market than what they previously could with their limited capital. A leverage ratio of ten-to-one signifies that traders can increase their market exposure (or trade size) by ten times the deposit/margin. Therefore, leverage can be calculated as – 

 Leverage = Trade size/Equity,

 where equity is the product of trade size and margin percentage

Traders might expect huge profits from higher leverage, however it also risks greater losses. For complete beginners, it is advisable to keep leverage of 10% or less. Also, incorporate trailing stops to manage risks effectively. 

3. Don’t be a Gambler 

Forex trading can turn into gambling if market strategies are not adequately implemented, especially when you don’t know where you’re heading!  Traders are prone to developing such a mindset when overwhelmed with the emotion of making money or recouping for their losses with subsequent trades. However, an enterprising and professional trader would not act this way. Discipline, patience and thinking calmly work as a good strategy when you approach trading. To avoid irrational behaviour in the market, as a trader you should focus on learning from the stalwarts in the market, pay attention to analyzing the market better, devise and implement diverse trading strategies before worrying about your losses or gains in the market.

4. Use Forex Risk Management Calculator

A Risk Calculator can prove to be one of your most significant trading tools as It can assist you to keep a check on the losses and deploy methods for course-correction. WIth details like your account currency, account size, and how much risk you want on each trade in either percentage or money. (Risk should ideally be less than 2%), the calculator will provide you with the amount that you should trade with. This takes guessing and estimation out of the equation and is great especially for less experienced traders as the trades suggested will be in accordance with your risk requirements.

5. Set Up your Risk-Reward Ratio 

Risk reward ratio is an essential trading metric that determines the potential profit of trade to its potential losses. For instance, if an investor risks 30 pips on a trade and could expect a gain of 60 pips, then the R/R ratio is 1:2. It generally ranges between 1.0 and 0.25. When calculating the R/R ratio for a trade, ensure that stop-loss and profit levels are logically placed and market conditions are taken into account.

6. Control Risk per Trade 

An enterprising trader will enter the market knowing his risks. Calculate the risk before stepping into the trade and make certain that risk per trade does not exceed 1-2% of your total trading capital. This way, even if the market doesn’t work in your favour, you’ll be cushioned from any setbacks and will not stand the risk of blowing your account.

7. Do Not over Trade 

You are bound to go off-track if you chase the forex market. Implementing a larger volume of trades than what you can handle will wreak havoc with your profitability and efficiency. Working in such a haphazard way will increase your risks. It is always advisable to not turn ‘aggressive’ with your trades. You may balance the position size if you are willing to take more trades so that the risk remains constant.

8. Understand Currency Correlations 

As currencies are priced in pairs,  when a certain currency pair rises, another currency pair falls. A deeper insight into forex correlations will help you manage the exposure of your forex portfolio. The relation between currency pairs is positive when they move in tandem whereas negative if they evolve in opposite paths. EUR/USD pair is an instance of a positive correlation. To make the most of FX correlations, always make remember to – 

  • Avoid investing in currency pairs that cancel out each other. 
  • Keep away from opening positions with the same quote currency.
  • Diversify your portfolio as it will help you mitigate risks.

9. Follow the News 

To make sustainable profits in the market, it is important to keep a consistent check on policies, changes and turbulences in the major economies of the world. This is because volatility in the economies translates to the forex market as well. Find where the economic data points including interest rates and inflation reports are heading. Staying vigilant will enable you to spot market trends before they become mainstream and help you make profitable trades. Markets across the globe change overnight and if you are updated with accurate news, you will not risk being blind-sided and have an easier time managing your trades. 

10. Trading System 

Often underrated, devising a trading plan and sticking to it can really improve your game. A trading plan is defined as a framework of guidelines that define your trading behavior. It includes financial goals, money management rules, and tools to mitigate risk pertaining to the trading realm. You must invest time and effort to carefully develop your trading plan according to your goals and trading personality. Planning your trades beforehand will guard you against making erratic decisions and mistakes and therefore ensure better evaluation of profits and losses.

Conclusion

Having an effective risk management system can cushion you from the pitfalls of forex trading. In a nutshell, make sure you keep yourself updated, have a proper plan, invest time to learn how to spot trends and trade consciously instead of running after profits.  

ShareTweet
Previous Post

Top Five Crucial Candlestick Formations In Forex

Next Post

Top 10 Most Traded Forex Currency Pairs In 2020

Related Posts

Easy Day Trading Strategies for Beginners

Easy Day Trading Strategies for Beginners

by Tim Baudin
April 7, 2021
0

Day trading is the art of executing your trades and closing them within 24 hours. The people who perform this...

Pros and Cons of Market Execution and Pending Orders in Forex

Pros and Cons of Market Execution and Pending Orders in Forex

by Chintan Patel
March 31, 2021
0

Not all orders in forex are made equal; traders have the option of placing an order that will immediately fill...

5 Lessons We Can Learn From ‘The Market Wizards’ book series: Part 2

5 Lessons We Can Learn From ‘The Market Wizards’ book series: Part 2

by Tim Baudin
March 5, 2021
0

This article is a continuation of the five lessons we can learn from ‘The Market Wizards’ book series, one of...

5 Lessons We Can Learn From ‘The Market Wizards’ Series: Part 1

5 Lessons We Can Learn From ‘The Market Wizards’ Series: Part 1

by Chintan Patel
February 19, 2021
0

Have you ever heard about the ‘Market Wizards’ series by Jack Schwager? These trading books are among the best-selling in...

Forex Trader Toolkit for Pros

Forex Trader Toolkit for Pros

by Chintan Patel
December 31, 2020
0

Using proper tools can significantly increase your profitability. The great thing about trading Forex and CFDs is that the majority...

Load More

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Best Forex EA

  • ROFX 9/10
  • Forex Fury 8/10
  • FXgoodway 7.5/10
  • Z Trader FX EA 7/10
  • Forex Incontrol Reborn 6.5/10

Popular News

  • The Best RSI and CCI Combination Trading Strategy for Optimum Returns

    The Best RSI and CCI Combination Trading Strategy for Optimum Returns

    2 shares
    Share 2 Tweet 0
  • Rofx Review – High Profitability and Stable Performance Analysis

    29 shares
    Share 29 Tweet 0
  • The Best Forex Scalping Strategy – Using 3 Popular Technical Indicators

    0 shares
    Share 0 Tweet 0
  • The Best MT4 Indicators & Expert Advisors For Forex Trading

    2 shares
    Share 2 Tweet 0
  • How to check if the indicator is repainting?

    2 shares
    Share 2 Tweet 0

Trading

Footer

We are dedicated to demystify the world of forex trading for you – no matter what level you are on.

Categories
  • Automated Trading
  • Day Trading
  • Forex Basics
  • Forex Brokers
  • Forex Education
  • Forex Forecasts
  • Forex Indicators
  • Forex Market Commentary
  • Forex Robots
  • Forex Signals
  • Forex Tools
  • Forex Trading Strategies
  • Fundamental Analysis
  • Money Management
  • News
  • Risk Management
  • Social Trading
  • Technical Analysis
  • Top World Traders
  • Trading Psychology
  • Uncategorized
Tags
arbitrage atr bollinger bands cci chart patterns classics copy trading courses day trading forex brokers forex charts forex ea forex education forex forecasting Forex Indicators forex software reviews grid trading hedging ichimoku macd market cycles news trading oscillators price action trading rsi social trading strategies tips & tricks trading bots trading platforms trend trading Video
  • Terms of Use
  • Privacy Policy
  • Compensation Disclosure
  • Risk Disclosure
  • About Us
  • Contact Us

Copyright © 2021 by ForexEzy.com

No Result
View All Result
  • Home
  • Forex Education
    • Forex Basics
    • Forex Trading Strategies
    • Money Management
    • Risk Management
    • Technical Analysis
    • Fundamental Analysis
    • Trading Psychology
    • Social Trading
    • Automated Trading
  • Forex Tools
    • Forex Robots
    • Forex Indicators
    • Forex Signals
  • Top Forex Brokers
  • Top Forex Robots
  • Commentary
  • Blog

© 2021, Forexezy.