If you are looking into trading forex for a living or trading forex for a long period of time, this forex trade management tips is definitely something you need to know. The most important thing in forex trading is not just about winning, it is to “live to trade another day” and this is something that most new traders have no idea about.
So what do I mean by living to trade another day?
It is the management of your risk in every trade to protect your capital so that you have enough capital to trade again. What’s the point of making a big win one day and get your account wiped out completely in a single trade on another day.
Below are some forex trade management tips for you
1) Never risk more than 2% of your trading account – I personally never risk more than 2% of my trading account per trade, this is to ensure that I can still live to trade another day even if I have a string of losing trades. With a low percentage of 2% risk per trade, I need to lose 50 times consecutively to get wiped out of my account.
The next reason why you should only risk a maximum of 2% per trade is because with this small trading size, you will not feel the pressure of trading and thus be able to make better judgement. This is particularly important for new traders.
2) Shift your stop loss to minimize your loss – This is another skill that all traders should use when trading. Whenever the price moves in your favour, you should slowly move your stop loss to breakeven point so that your capital is being protected even if the price later moves against you.
If the price continues to move in your favour, you can slowly move your stop loss to profit level and this can also protect your profit.
3) Take partial profit – Another way you can protect your profit is by exiting part of your trade when you are in profit and allow the rest of your remaining position to run and grow.
Let says that you have entered a SHORT trade at 1.2800 and the price moves in your favour and make you 20 pips. At that point, you can exit half your position to take some profit and then move your stop loss down to breakeven. This will allow the remaining half position to run. In the case where the price reverses, you have already taken part of the profit and this trade is considered successful.
If the price continues to move in your favour, you can then locked on to more profit and eventually exit your position once it hits your target level.
The above are 3 forex trade management techniques that I often use in my trading and I hope that these tips can be useful in your trading as well.
If you have any trade management tips to add on, please give your comment below as it will be very useful for everyone in this community.