To become a successful forex trader, you need to develop some qualities such as ability to take risk, develop money management skills, have a positive attitude, remain motivated, develop confidence, should be goal oriented, be open minded, learn to handle stress, develop all time learning attitude and be consistent.
What is the risk and how much risk one require to take in Forex? The good news is you have the control on the amount of risk you want to take in Forex. Let us see an example to understand.
Suppose your account balance is $5000 & after doing your analysis you decide to go long on EUR/USD i.e buy position. Now the question is what position you should open and how much profit you should expect from this trade. First rule is,
Never risk more than 5% of your account.
Now for the given account balance, 5% comes out to be ($5000x5% ) $250. So you should not risk more than $250 on any single trade.
Here you need to know something important called as Risk-to-Reward ratio. If I say Risk-to-reward ratio is 1:2, that means in order to get 2 as a profit, I am ready to risk 1, means Profit is double of what I risk. Some traders trade with risk-to-reward ratio of 1:1, 1:1.5 & so on. I recommend to stick to 1:1.5 initially. In other words, If my analysis says pair would move 45 pips up, I am ready to risk 30 pips, provided my risk is not more than 5% of my account balance. If one or other condition does not satisfy, I will not take that trade.
After calculating risk & stop loss, you need to decide which lot suits for this calculation. There are lot of Position calculators available online or click here. This is how you need to take care of your money management and risk. wish you happy trading. stay connected...
