Home > Technical > Forex trading and ca...

Forex trading and capital management, how to reduce the risk of foreign exchange investment?

2022-01-24

1843

Foreign exchange investment has objective risks. If investors want to make money through foreign exchange investment, they must first learn money management. So how to do it specifically? This article will introduce you to foreign exchange trading and capital management, as well as how to reduce risks in foreign exchange investment. Novice investors can refer to it.

Forex Trading and Fund Management

Only trade with real risk capital

In essence, venture capital is "idle" money that you can spend where you don't really need it, and that's what you should be spending on your account trading at your disposal. If you trade with non-real venture capital, your chances of becoming an emotional investor will greatly increase because you will not feel the pressure to lose your trading capital and make it grow rapidly. If you do not have enough funds at your disposal to trade on a live account, then do not trade until then.

Before risking real money, do simulated trading

Demo trading is the key to long-term Forex trading success. If you don't do demo trading before real trading, you have no way of knowing how a specific Forex trading strategy works.

Think of yourself as a risk manager rather than an investor

As an investor, your main goal is to efficiently manage the risk of each trade, viewing and weighing the possible risks and rewards of each trade signal. Define the risk before placing the order, and make sure the amount of money at risk is moderate enough to allow you to sleep peacefully.

Clearly understand the size of the position

Position size is a means of proper foreign exchange funds management. Knowing the size of a position in a trade is critical to maintaining objective thinking and clarity when trading the market and properly managing risk.

How to reduce the risk of foreign exchange investment

Use stop-loss orders to reduce risk. When making a transaction, you should establish a tolerable loss range and make good use of stop-loss transactions to avoid huge losses. The loss range depends on the account funds. If you stop the loss, don't take a rest, because you have removed the risk that the market will continue to deteriorate and the loss will expand infinitely.

The trading capital must be sufficient. The smaller the account amount, the greater the risk of trading. Therefore, it is necessary to avoid making the trading account only enough to fluctuate at 50 points. Such an account amount is not allowed to make a mistake. However, even experienced foreign exchange speculators sometimes make mistakes.

Operate with the trend, don't go against the trend. Remember the old rules of the market: lose your losing positions as soon as possible, and hold your winning positions for as long as you can. Another important rule is not to allow losses to occur on positions that were already profitable. In the face of a sudden market reversal trend, instead of closing the position without profit, do not let the position that was profitable turn into a loss.

This article focuses on foreign exchange trading and money management, and how foreign exchange investment can reduce risk. Investors should note that foreign exchange trading is a combination of capital management and investment skills. Of course, capital management itself is also a manifestation of skills. You can refer to the previous content to conduct transactions and fund management to reduce the risk of foreign exchange investment.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

CM Trade

As a world leading financial trading platform, CMtrade Provides comprehensive one-stop trading services and opportunities for traders.

[Products]

The platform provides over 32 kinds of popular financial products such as forex, precious metals, crude oil, indices, cryptocurrencies and more.

[System]

2 top trading systems CM Trade MT4 / CM Trade APP, powerful and easy to operate

[Service]

Comprehensive market news, professional market analysis, 7*24 hours online customer service

[Advantage]

Low cost, high leverage, flexible one-stop all day two-way trading.

[Authority]

Licensed and strictly regulated by authorities. Traders deposits are independently kept by the bank. Fast deposit and withdrawal. Fair, efficient and transparent trading environment.

Free Access
Daily Trading Strategy Download Now

CM Trade Mobile Application

Economics Calendar

Forex trading and capital management, how to reduce the risk of foreign exchange investment?

Access to global trading markets anytime and anywhere