How to make your forex trading more profitable

Julie Brownlee, Fsp Invest, 20 Nov. 2014

Tags: forex, forex trading, percentage risk method, forex risk management, trade forex, forex trading strategies,

You may think the key to forex trading success is having more winning trades than losing trades. But that’s not the case.

As a forex trader, you will have winning trades and you will have losing trades.

The key to forex trading success is having a strategy in place to handle your losses.

So what should you do?

Read on to find out…

Successful forex trading comes down to a good risk management strategy

As long as your forex trading strategy yields a win-loss ratio of more than 50%, you can make money.

You just have to manage the downside.

So one great way to manage your risk is to use the percentage risk method.

What is the percentage risk method?

This works by risking the same percentage of your trading account per trade.

To use this strategy, you need to know the stop loss level of your trade and the percentage risk.

Generally, the rule is not to risk more than 2% of your trading account on each trade.

Let’s go through an example to see how this works…

You decide to stick with a percentage risk of 2% of your trading account. If you start off with R20,000 this means you only risk R400 (2% of R20,000) on each trade.

This means that R400 is the maximum amount you can lose on a trade, as long as your trade doesn’t gap through your stop loss.

Working like this, it would take you a long time to lose your trading account if you went through a spell of losses.

If you had R20,000 and followed this strategy and your first trade hit its stop loss, you’d have R19,600 left in your trading account. So the next trade you put on your only risk 2% of this or R392.

If you have some winners, the money in your trading account will increase and so will your trade sizes.

So there you have it, how to make your forex trading more profitable.

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