Nine Key Rules for Forex Risk Control

The Forex market is a very risky market, and its risk mainly lies in the fact that there are too many variables that determine Forex prices. It is very necessary for Forex speculators to carry out risk control. Nine tips for Forex risk control will help you control risks.

1. When a trade is not going well: (a) Reduce the size of the trade; remember that several positions in highly correlated markets are the same as one large position; (b) Tighten your stop loss; (c) Suspend entry into new transactions.

2. When a trade does not go well, reducing risk depends on closing the losing trades rather than closing the winning trades.

I remember Livermore mentioned this conclusion in "Memoirs of a Stock Operator": "I did exactly the opposite. The cotton trade showed a loss, and I kept it. The wheat trade showed a profit, and I sold it. Of all the speculative mistakes, there is no bigger mistake than trying to spread the cost in the losing trade. Always sell the losing trade and keep the winning trade."

3. Be extremely careful not to change your trading pattern after making a profit:

4. Do not initiate any trade that seems too risky at the beginning of the trading process.

5. Do not suddenly increase the number of positions in a typical transaction. However, it's okay to gradually increase your position as your NAV grows.

6. Use the same common sense for both small and large positions. Don’t say, “This is just a small experiment.”

7. Do not maintain large positions based on important reports or major government statistics.

8. Use the same money management principles in long-term trading and very short-term trading. It is easy to let down one's guard and assume that the moves on a span trade are gradual and not bother with setting stop loss protection.

9. Without planning, do not buy at a price when the transaction is about to be closed.