When it comes to trading, one of the most critical aspects of the whole process is proper risk management. Whenever you open a new account, you can see that text on the bottom of the page, stating that the majority of the traders lose money. Firstly, by the law, it has to be there. Secondly – it’s true.
The Number One Rule When It Comes To Risk Management
Every experienced and successful trader will tell you that the most important rule of trading is only using the money you can afford to lose. Depositing your rent money is not only a terrible idea from the financial point of view, but also impacts you on the psychological level. Having on the line money you can’t afford to lose, will make you stressed, and uncomfortable with your trading. That will inevitably translate into poor decisions. Always deposit only the money you can afford to lose and into safe, major Australian fx broker, that will guarantee the safety of your funds.
Have a Clearly Defined Entry And Exit Point And Risk-Reward Ratio
When trading, you need to have a proper strategy, as well as entry and exit point. One of the most common ways people use money trading forex is just jumping in, without a plan or technical/trend analysis. Learn to see the patterns and have clearly defined entry and exit points in every trade. As a rule of thumb, the reward should be at least two or three times the risk you are taking. That way, even if half of your trades are wrong, you will still make money. Always use known Australian fx brokers – the proper company will offer you tutorials and trading lessons to improve your ‘game’.
Learn To Manage Your Trading Account Properly
The beginnings are the hardest. Not only because of the learning curve, but also of your rather small account balance. A good trader never puts on the line more than a few percentages of this account. Unfortunately, while trading, emotions can take better of you, which will result in adding more and more into your position. Next thing you know, the market took a turn, and you are heavily leveraged and underwater.
Use A Broker With Narrow Bid-Ask Spreads
If you are a more experienced trader, depending on your strategy, you understand the importance of good, tight bid-ask spreads. Markets move fast, and in many cases, the narrow spread will be the difference between losing or gain on a trade. Good example? Australian fx broker. Not only they offer permanent, narrow spread but also no commission trades.
That was fast! Now, when you learned a few things about risk management, try to think about how you could use that knowledge to better your trading. Proper risk management in trading is everything, and if you want to be the best, you need to learn it!