2 Ways to Do Risk Management
One of the keys to success in learning forex trading is risk management. Traders can claim to have a powerful trading strategy or use reliable analysis, but it's useless if all of this is implemented without risk management. This is because without risk management, sooner or later trading will fail to achieve profitable results.
In the forex market there is no exact science that can 100% predict price movements correctly. As good as a system is, there must be a potential for prediction errors that can make a trader's trading position lose. Therefore, when learning to trade forex, traders must familiarize themselves with good risk management settings. Here are the risk management methods that traders can apply in trading:
Stop Loss
Stop loss is an order or an order to close a position that is useful for limiting losses within a certain value. In this case, it means that when the price moves not according to the trader's expectations, and then touches the limit (stop loss), the order will automatically stop. Traders will receive losses according to what has been determined as a limit. Although stop loss is designed to limit losses, not all traders like it because by placing a stop loss, it means that the trader is at risk of closing a position in a loss state when the price is still in a correction state. However, it all comes back to the trader himself. If the trader uses the stop loss correctly, the trader will not experience a loss when the price is correcting.
Recovery
Losses in the trading business should not be allowed because it can consume all the capital they have. These losses need to be minimized by way of recovery. Recovery is a very important part of risk management to master, without being able to master risk management or make a good recovery, it will be very difficult to survive long in the trading world. Because by doing a recovery, traders can reduce losses and can maximize profits and at a minimum for a return on investment. In the market no one can predict the price movement will go up or down. Therefore, traders must be able to recover when the market reverses so that there is no loss or loss in trading. There are 3 recovery methods that can be used, namely cut loss, switching, and averaging.
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