“A ship is always safe at the shore - but that is NOT what it is built for.”
― Albert Einstein
There is no arguing about it – forex trading does involve risk. All the various fundamental and technical analysis shows you that even when things seem predictable, sometimes volatile things happen.
Risk Management in Forex Trading
Financial world brings vast, thrilling and at times completely shocking investment experience and yet there are tones of people who make profits with currency exchange. It is your neighbor, your co-working, your best friend, your son’s girlfriend and it might as well be you!
Profits do not come easy in trading and unless you figure out your style, learn the market patterns and adopt technical and fundamental skills to analyze the changes – forex will not be your next best thing.
Let’s take a look at poker for a minute. While most card enthusiasts treat the game as gambling and rely on luck from up above, pros learn the ways to calculate the risks and master the techniques. Pros also know when it is better to fold.
While forex is overall more complex money-making machine since you do not have all possible outcomes in the deck in front of you on the table, trading has more instruments and possibilities to make money come your way.
While poker outcome is either win, or lose to a better hand, forex has many options and possible results. In trading, you can turn any kind of market movement into asset. You can also minimize your losses by getting out of a bad trade before it goes completely rotten.
When it comes to trading, you have to master the risk management. This will separate you from gamblers and turn you into a pro. With all that being said, keep in mind that losses in forex are part of the strategy and even top-notch traders lose substantial amounts, but they all have long-term strategy, hedging techniques and risk management skills to win big time in the long run.
Today newbies have fantastic opportunity called social trading, where you can check out other traders’ performance and results, measure their risk-taking style and decide whether to copy them or not. This definitely makes forex trading much more accessible to many.
There is no shortcut in becoming a good trader. Without good risk managing skills, it is hard to stay lucky for too long and you end up losing it all later on. The trick is to learn about the risks and know how much risk you can take with each trade.
Just like in poker game, forex involves a lot of psychology and, therefore, the pros you sit at the finals table are never gamblers, but rather very strong individuals with solid trading plan and risk management skills.