Friday, March 11, 2016

The Forex Risk Management State of Mind

Trading has taken a variety of shapes and forms throughout the years, the exchange of goods between two parties is an ancient habit that has taken on an overload of shifts so that this simple form of business can accommodate the needs of the people involved according to the era. Right now we are part of the web era, where lives and businesses mostly depend on the number of clicks we make each day. The fact that a trader or investor’s exchange now lies in the hands of millions of invisible wires that connect him with the broker and liquidity provider raises an unconscious feeling of anxiety. Simply because if you can’t see something how can you know if it’s getting done, or if it’s getting done correctly?

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Online Forex trading does present the same amount of risk that would either way exist in any business exchanged but its only intensified because the invisibility of the action makes it that much easier for the investing party to lose control. Successful online trading cannot take place without proper risk management. To an unfamiliar eye online trading looks like gambling but what separates online trading from gambling are the risk managing strategies hidden behind each move.

The mind of the trader looking to build a successful career in forex trading begins to take shape and formulating the ideology of risk management the moment they begin to seeking the most suitable broker for them. A casual trader that is only looking for a way to make an extra income will not pay attention to many of the fine details. A successful trader however, the one that is thinking about the risk involved in his decision will look for the most dependable broker. The broker you choose becomes your financial partner and you would only choose to do business with someone that is looking out for your best interest but is also making an investment in mutual success.

Forex risk management like most aspects of forex lies in the trader’s discipline. The word ‘Risk’ must ring in the trader’s ear the entire time in order to keep his or her feet on the ground and to not get carried away by the rush of several successful trades. It is also important to not let the word take over and become the only factor the trader relies on because that consequently results in a dead beat trader who only makes ‘safe’ trades and instead of moving forward they are actually moving down.

Proper risk management can be developed through the creation of what is called as a ‘Trading Journal’ the journal is used by serious traders no matter their skill level. It’s a collection of all their past trades as well as trading strategies that have been used, are being used and will/might be used. This personal collection of data keeps the trader from not just repeating past mistakes and putting him or her in a wide open area of risk but it also works as a self-improvement kind of manual. The only one that can judge how much the trader can and is willing to take is the trader himself that’s why self-awareness is vital from the get go.

A solid forex broker will keep his trader’s informed about all the kinds of risk management strategies available but these will always be the various tricks of the trade that the trader’s will have already heard of. That’s why strong risk management can only come from the trader and what the trader invests in building his or her essential risk management state of mind.


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