Currency Trading for Dummies - How To Manage Your RISK Trading Forex Currency Pairs in 4 Easy Steps

In my experience, the most successful traders are not just the ones who place the best positions

, but they are also the smartest and most disciplined in their strategy.

Over the course of my trading experience, it's without a shadow of doubt that the following 4 steps are crucial risk managing steps.

1) Limit Orders

Limit Orders help instruct your trading system to "lock in" your chosen winning position. This will therefore automatically exit your position when you hit your target position.

2) Stop/Loss Orders

Enabling you to cap your losses on your losing position,the stop/loss order will instruct your system to automatically exit the position when you've reached maximum loss limit.

3) Trading Discipline

Using both Stop/Loss and Limit orders on "every" position is key to not letting emotion influence a trade.

Many amateurs fail to instruct this discipline from the outset and as a result, get burnt, sometimes badly. Amateurs will become glued to the screen, trying to juggle their positions realtime, thus missing critical action points.

4) How to Set Limit and Stop/Loss Orders

Novice traders may well not be aware of this but as a general rule of thumb, your Stop/Loss Orders should be placed closer to the opening position price than your Limit. By doing this, you will more than likely be successful while being right less than 50% of the time.

Let's take for example a situation where you use a 30 Stop/Loss with a 100 pip limit order on all your positions. In this scenario you only have to be right on a 1/3 of all positions to make a profit.

However, you will need to be smart setting them up. Where you place your Orders will depend on your level of risk.

If you do place your Stop/Loss order too close to your opening position it may be triggered by normal market activity, thus knocking out your position before it can retrace.

Similarly, a Limit Order maybe triggered prematurely before potential profit can be realised, so this is where a seasoned Forex Trader is essential to your trading success.

Currency Trading for Dummies - How To Manage Your RISK Trading Forex Currency Pairs in 4 Easy Steps

By: Rob Carmichael

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