Overcoming Risk

Risk is an inherent part of the Forex market. Whenever you buy or sell a currency, there is always the risk that you will lose money. There are ways in which you can overcome this risk and make your trading capital less of a liability. Scaling back position size is a good way to begin as well as by using the TradeForge FX trading platform. If you are trading a volatile pair of currencies, you can simply trade with a lesser amount than you usually would. This is the most basic way to put less of your trading funds at risk.

Another common way to overcome risk is to trade less volatile currencies. Major currencies such as the U.S. dollar and the Euro see much more trading action than minor currencies, making large changes a bit less likely. The typical rule is that the more it is traded, the less it will move up and down on its price chart.

A third way to mitigate risk is to place stop loss points when initially opening a position, and then trailing stops once the price begins to move in your favor. This way, you eliminate large losses and protect your growth once it begins. This might sound overly complicated, but it is actually fairly easy. Decide upon a point where you can stomach a loss before you open a trade. In other words, think of a number that you think the currency might realistically drop down to and then put your stop loss point just a bit below that number. This will take into account the minor variances that are common on a daily basis. Once the price begins to move in your favor, setting new stop loss points will make sure that you walk away with a profit once the trend that you are riding comes to an end.

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