Forex Basics - Risk Management and Capital Building
Forex Basics - Risk Management and Capital Building
The object of trading forex is making money!
However, with this, comes the risk of losing money and it's critical that all traders apply clear money management techniques that ensure they are controlling their exposure to risk with every trade.
Before you start to trade you should start by creating a specific trading plan that's specific to your needs.This plan should ensure that on each trade your exposure is limited to a maximum of 5% of your trading capital. In addition the plan should focus on building capital quickly as well as generating an income.
As a result this will enable you to progress your trading faster which will in turn enable you to grow your income as quickly as possible.
It's also important that you understand the psychology involved in trading and, even more importantly, are able to understand it in a way that will enable them to control your emotions. Many people don't realise the power of their subconscious particularly where money is involved and this is always a critical factor to consider with trading. If a trader doesn't understand and control this then they are exposed to compromising their trading criteria which will in turn lead to them making bad decisions around their trading.
Being aware of the psychological effects will have on you as a novice trader is critical at this stage because you can focus on these dangers as they arise. This helps you to understand the dangers in a live trading situation and, enables you to control them so it doesn't have a detrimental effect on your trading. Having a plan and remaining disciplined will help you control your emotions.
Identifying successful trades is critical of course. But there is so much more to trading than just that. This is why the majority of new traders are not successful because they don't become skilled in every area that they need to become successful.