Every successful forex trading strategy will include clear-cut tactics for risk minimization. The major cause of forex trading loss is the poor implementation of risk minimization strategies, especially by novice traders. Right risk control and management is very important for forex success because the lack of which can made the trader ‘out of the business’. The main risk minimizing strategies available for traders include,

  • Management of Leverage: Most forex brokers offer a leverage of 1:100 for trading currency pairs. But blindly utilizing this opportunity can cause high risks. Leverage is regarded as a ‘double edged sward’ that maximizes both profit and loss.
  • Effective Stop-Losses: Placing and moving stop-losses is the most effective risk management strategy a trader got when the positions are open. One of the main reasons that most novice trader fail is the lack of stop-losses or wide unrealistic stop-losses.
  • Lack of Demo Trading: Demo trading is so far the best tool available for traders to test their strategies without risking any money. Now most forex brokers offer demo trading in real market conditions. This enables traders to practice their trades by effectively placing trades and managing risks.
  • Keeping Realistic Profit Targets: Aiming for higher unrealistic targets can hurt traders in this volatile market. Traders should follow a ‘hope for best, prepare for worst’ strategy when trading currencies.

This blog is written for Orient Financial Brokers, a leading online forex broker in UAE and Middle East.