6 Amazing Tricks To Manage Risk In Forex Trading

                                                       

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Setting a clear goal and knowing every corner of the forex market is the most important pre-requisite for anyone entering the market. Although, this profession has spread to every corner of the globe by leaps and bounds and has become a vital home business for many still we must be aware that forex market involves a lot of risks and is highly volatile.

With the spread of internet, a smart phone in almost every hand and proliferation of online trading platforms, it may seem to many that there is nothing more easier to make quick wealth than forex market.

Since forex market is non-centralized and remains open almost 24 x 7, the number of people entering this market is growing rapidly. A lot of these new entrants are of the opinion that having a computer and internet connection is all that is needed and the rest will be taken care of by the broker. Unfortunately, many new entrants leave the market as quickly as they entered after losing a large chunk of hard earned money.

Two Most Important Areas of Risk :-

#1) How High Leverage Can Ruin You :

Investors/traders use leverage to make significant amount of profit with low amount of cash in his/her trading account. Investors/traders aim to profit from fluctuations in exchange rates between two different countries. 

When a trader enters the forex market he/she must first open a margin trading account with a broker. The margin allowed to a trader depends on the broker - it may be 50:1, 100:1 or 200:1. Leverage is actually a loan to the trader by a broker who maintains his/her account.

This means a trader can buy or sell upto 50, 100 or even 200 times more than they can afford.But this type of leverage or margin trading bears the potential risk also. 

A section of dishonest and selfish forex brokers will always indulge a trader to use high leverage as it results in more spread income for them. The higher the position of the traders the higher the brokerage the brokers charge to their trading accounts.

One must bear in mind that high leverage is like a 'Double Edged Sword'. It never results in huge profit always but can ruin a trader with a huge loss as well.

So, before entering a trade in forex market with high leverage/ margin one must ensure if the specific trade deserves it. The broker will never suffer a loss if you lose your money. 

#2) Never Fall Prey To The Wicked Designs of Unscrupulous Forex Market-Makers :-

These guys known as retail market makers often indulge less experienced trader specially newbies to use high margin and set stop loss in such a way that enables them to close trades almost at their own will and at their pre-set prices during busy hours. 

Even if the market makers do not offset the traders position, a loss generated when a 'stop loss' is triggered becomes the market maker's gain.

These retail forex traders are so experienced that they can easily manipulate the prices depending on their positions. These market makers often persuade the inexperienced traders to take highly risky positions specially when the government is about to announce major economic policies/reforms. 

The percentage of traders making reasonable uniform profit in forex trading is very low. The vast number of traders who leave the market after losing their deposit in their trading accounts because of these dishonest speculators, are most probably unaware that their hard earned money, in some form or another, become the profit of the market makers.

The only thing that can save you from this disaster is a complete training in forex, take your time with small trade and without leverage/margin just to gain experience. Remember, trading in forex market is not as simple as it is presented. In the beginning, you are most probably to lose a lot but try to keep that loss within your financial capacity if you want to survive in forex market.