This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Forex Trading Tips For Managing Risk By The Forex Trader

LONDON, April 10, 2012 /PRNewswire/ --

Trading forex enables you to speculate on the movements of forex prices by depositing only a small fraction of the total value of each trade, through its leverage feature.

This also offers traders easy access to a range of currencies as well as the potential to magnify their return on investment (ROI).

However, the leverage feature also presents significant risk; traders can incur losses that exceed their initial deposit.

Below, The Forex Trader offers advice on some of the issues affecting traders and how they can rectify them - looking closely at the risk management tools offered through City Index.

Problem: "I have 'Eyes Bigger Than My Belly'"

"Traders have a tendency to get 'caught up in the moment' whilst trading the forex market, particularly during volatile market conditions, i.e. when a market's price moves quickly.

Trading on impulse can result in unrealistic trade sizes and a lack of risk management, including illogical entry and exit points, forgetting to apply stop loss and limit orders, and so on.

As a result, traders can end up supporting positions too large for their accounts and ultimately heightening their risk potential."

Answer: "Create a comprehensive trading strategy."

"The key to avoiding this is to create a comprehensive trading strategy which you can follow whilst trading forex."

Problem: "Bank that profit!"

"Similar to above, it's easy for traders to get 'caught up' when they are in profit and this can entice them into locking in a profit too early.

This can often leave those traders somewhat disappointed, particularly if the market continues to move in their favour and had they waited, they could have netted a much larger gain. One common theme amongst new forex traders is to run their losses and lock in their gains too early. Experienced traders will tell you that the balance should in fact be the opposite, with profits run and losses stopped early."

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs