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Forex Live Risk Management

Forex Live Trade Risks

When you first enter the forex live environment, you need to calculate your risk levels before you enter a forex live trade.  To calculate successful trades it will be necessary for you to know how to do technical and fundamental analysis to determine the best time to trade.  You have to be aware of the market dynamics and understand your psychological trigger points as regards price level.  You can achieve this by using price charts.

Forex Live Risks

Before you enter the live trading market, you have to do adequate calculations regarding the management of risks involved in the trading market.  If you are able to manage your risks, you will be able to handle forex trading.  To maintain the odds in your favour, you need to set a cut-off point for the price level.  Prior to purchasing your position, you have to prepare mentally to accept the risk level you set.  If you do not prepare for this, your trade may become too stressful for you to handle and you may lose objectivity as the trade continues.

You should set a second stop point which would be the level you are comfortable moving your first to, to achieve a positive result.  This is called stop sliding.  The second point is a breakeven point if your position is taken out at that point.  This is an effective risk reduction method.  This will occur provided the market is liquid and you are sure your trade will be done at that price level.  It is vital that you understand and have tested your abilities with stop orders, limit orders and market orders, before you attempt to use this method of setting your limits.

Liquidity of Market

The liquidity of the market refers to the availability of buyers and sellers in the market to make trading easier.  In this financial market, liquidity is not a problem, particularly if you are trading the major currencies.  Forex brokers do not all offer the same levels of liquidity and it also varies from one currency pair to another.  Your forex broker’s liquidity will affect the effectiveness of your trades.  If you are not trading via a large financial institution, you will depend on an online broker to carry out your trades.  Liquidity is the reason why you should opt for a forex broker that offers high liquidity levels.

Trade Risks

Your level of risk is determinable by the amount of available capital you have.  You should control the level of capital you place on each trade.  An appropriate level to consider should be a maximum of 2% of your capital balance.  This means if you currently have $2,000 in your trading account, you should avoid risking more than 2% of that amount.  With suitable parameters, the maximum amount you should be prepared to lose on a single trade should be around $100.  This means that you are able to absorb 20 consecutive losses before you wipe out your account balance.  These types of losses are rare if you have implemented suitable risk management policies and if you trade carefully.

To maintain your account appropriately, you should implement suitable risk policies and maintain them.  Do not waiver from your strategy or your risk levels.

 

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