subject: Forex Trading - Controlling Your Risk Allows You To Control Your Reward And Ultimate Success [print this page] One of the first rules that you ought to keep in the back of your mind in Forex trading is to never add to a trade that is spiraling downwards to eventual complete and utter devastating annihilation of your Forex trading account. Avoid this very common trap and you may make it in the foreign exchange arena.
This is a big no-no of trading. Being in controlling your risk allows you to control your reward as well. You must not be trading in any system if you don't have any idea of your risk level. If you do, then you are only inviting financial trouble.
Ahead of trading, you should make clear to yourself and the system when you will exit the trade if the market is not moving to your advantage. This will prevent your losses losing control and wiping out your savings. Staying in the game is paramount to your long-term success in Forex trading.
Here is an example to illustrate what I'm telling you. If you have a $1,000 Forex account, and you're putting half of that at risk with each trade, how much money will be lost?
It's glaringly clear that this is totally poor risk control. There is a stack of literature on Forex trading psychology and trading discipline which explain the importance of using them for successful trading. All the best Forex traders are aware of trading discipline and the crucial role it plays in their success or failure.
Maintaining trading discipline wil have to precede the tools to trade in order for them to be effective. Keep focused and continue with your trading system in disciplined and steadfast manner. Sticking with an effective trading system will in all likelihood lead to better profits and create wealth for you.
Your emotions will be less relevant to your Forex trading, freeing you from the frustrations and nervousness of guesswork. Believe me, having definite parameters for each trade and eliminating emotional intervention will benefit your trading career. A few of the basic factors have been looked at that you'll require to be a successful Forex trader.
None of them should be ignored as they have all already stood the test of time. Refer to them once in a while and be sure to implement these rules in your trading. With these rules you'll keep on the road to being a prosperous Forex trader and you'll avoid the stomach ulcers as well.
by: John Eather
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