Forex Trading : 3 Ways to Control Its Exposure to Risk :


If you trade regularly in the forex market, then you have probably already found yourself in the situation where you are struggling to cut a loss. The market is going against you but you hope it ends up turning and hold your position up to an unfortunately critical threshold for your trading account. This problem is recurring among forex traders and it is indicative that generally risk exposure is more important than risk tolerance.

No one likes to lose but the foreign exchange market can sometimes be capricious and you will inevitably endure setbacks. If, unfortunately, the market can not be controlled, one can still control its exposure to risk. Here are three effective ways to do it.


 

Position Size

Large positions result in high volatility of losses and profits of traders. Indeed, a movement of a few pips is much more significant on a big position than on a small one.
The size of your position should reflect your level of confidence in you and in the marketplace. Choose a position size sufficient to get significant gains but not too much to be able to rise if it is a loss that you save.

Period of holding the position

In general, a long holding period is equivalent to a larger position size because it exposes the trade to a wider range of possible price movements.
Set a time limit for your trades and be firm about schedules. Indeed, when you hold a position in line longer than expected, you expose it to movements that you do not necessarily anticipate and that will make you vulnerable.

Stop loss

Some traders open up large positions in the market and protect themselves by placing tight stop-loss. Others tend to adjust their initial loss stops depending on the state of the market. The risk of the first method is to place stops loss so tight that the trader does not make a profit. The risk of the second method is to register too many small setbacks to finally make a profit.
That being said, stops loss is not popular for anything in the markets so feel free to use them. Just make sure to adapt them to your business personality so that at the end of the session your winnings are more important than your losses.
 
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