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How to increase income and reduce risks when trading Forex What a beginner trader should do to increase profitability and minimize risks: practical recommendations for forex traders. Increase of profitability and decrease of the risk level is one of the most difficult tasks for a Forex trader, regardless of his trading style. First of all, it depends on the ratio of profitability/risk and profitability.
Every currency trader, which is quite natural, strives to increase profitability of his trade and decrease risks of losses of his investments. Unfortunately, this desire sometimes runs counter to ambitious goals that the trader has set for himself. Often, a trader manages to increase profitability of trade and profitability/risk ratio on the whole by shifting the emphasis from the percentage of positive deals to the size of profit of a deal and the time of its achievement. There are specific recommendations allowing trade forex to achieve the set goals, forgetting about emotions and financial difficulties.
How to increase the income and decrease the risks when trading on Forex
Competent money management First and foremost, of course, is a smart money management strategy. A trader who risks a small percentage of his funds is not afraid of losses. If the trader's risk is a certain percentage of the price of the asset during each transaction, then he has the confidence of smaller losses and larger profits. In this case, looking at the situation from the point of view of emotionality, it is much easier to use various tactics of risk reduction on Forex and maximization of profitability. Another fairly effective method is to change the size of the position depending on the market dynamics, including varying the percentage of the price of the asset.
Entering the market correctly It is worth taking a more responsible approach to selecting a market entry point. Instead of opening a position that will yield a minimum profit, you should look for a market entry that will yield a maximum profit. Simply put, it is better to open a position with a 20% chance of getting a profit, ten times the possible level of loss, than a position with a 55% chance of getting a profit, equal in volume to the stop-loss.
Reducing losses There is also a "secret weapon" for increasing the profit/risk ratio - a hard loss limitation. Analyze your trades and notice how many positions have been showing positive momentum from the start. Sometimes, in order to win more often, you need to halve the allowable losses. Do not wait for this measure to increase profitability - it is aimed solely at reducing losses.
Exiting a position in a timely manner. And, finally, there should be a proper exit tactic. The best way to stop at the right moment - is the refusal of the partial fixation of xauusd of the transaction, which has a low profitability / risk ratio.
Basically, any tactic of exiting the market provides for a sufficiently high profitability/risk ratio before closing the position. It is necessary to use methods of technical and fundamental analysis, to study properties of the traded asset and to work out an optimal trading strategy.
Particular attention should be paid to the already mentioned limitation of possible losses and the volatility of the asset.
You should not disregard the stop-loss order, as well as the manual closing of the position in accordance with the time frame. As an alternative, you can go to the level of limiting the percentage loss according to the achieved yield/risk ratio. For example, having a yield to risk ratio of 3:1, you can determine the limit on the unrealized profit of about 75%; with a 6:1 ratio the limit will be 50%; with a 9:1 ratio - 25%.
Volatility, in terms of profitability/risk ratio, should be perceived as follows: with very high risks the potential profit should be treated conservatively.
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