How risky is Forex trading? If you look at the statistics you will see that 95% of retail currency traders lose their money and of course there are risks trading currencies as there are in any speculation but if you understand the risks you can win.
In this article, I am going to look at the basics of successful money management in Forex trading which will give you, a solid base of protection on which you can you build long term profits on. Let's look at the essential, money management basics for bigger profits in more detail.
Here we will look at 6 x money management mistakes which are made by traders which will not only slash profits, they can also wipe out trading account equity quickly so let's look at the key errors traders make in more detail.
Modern Portfolio Theory ( MPT) is popular and postulates, that by diversifying across a number of uncorrelated assets you can reduce the risk on your portfolio and increase the overall rate of return at the same time. Will it work in Forex trading and should you use it, as part of your Forex trading strategy? Let's take a look at the logic of the theory in more detail.
Before you start to trade Forex you need to understand, your tolerance is to drawdowns or losses and this trading tip is all about this key point. While its not discussed much online and many traders never even think about it, understanding it and its impact is one of the keys to long term trading success.
Forex trading is as much about dealing with losses is it is about dealing with losses correctly. You will have periods of drawdown and they will last for trade after trade so how do you deal with them and how do you work to get your equity back to new highs? Lets look at this aspect of money management in more detail.
Never risk 2% on any trade, is a commonly accepted currency trading tip. You will often hear as sound investment wisdom but if you want to achieve really great gains in the Forex market forget it, the trading tip is nonsense. The logic behind it is flawed and will ensure you never make great profits on your trading account.
