Forex Risk Management Precautions

By Tony Scalf 

The foreign currency exchange industry is one of the most unpredictable, liquid and volatile business industries ever operating worldwide. It accommodates to approximately 1.5 trillion U.S. dollars worth of transactions and it becomes a chance for banks, large corporations, business companies of all size and even individual investors to gain profit through forex.


The forex risk of losing or gaining profit in the market is as inevitable as the rising and setting of the sun daily. There is no way that a trader can fully and perfectly go about his trading business without undertaking risks of any sort. Because of this very sensitive and crucial topic in the forex trading industry, all traders must at least exercise some form of forex risk management in order to avoid unnecessary and devastating losses that can kick you out of the game completely.

There are a few things an investor must remember before he or she makes any trading decisions. One among which is cash flows, liabilities and assets are directly affected by any change in the exchange rates that may occur and of course since the exchange rates can change in a snap of a finger, international transactions especially dealing with finances will consequently greatly affect businessmen, traders and investors.
It is important that a trader must perform forex risk management measures especially on economic exposure, translation exposure, accounting and real operating exposure.


Because of the unpredictable changes in exchange rates, the transactional exposures are one among those that contribute highest risks to forex because cash flows, import and export services, lending and borrowing of foreign currency can greatly affect the exchange rates of involved currency pairs. A wise investor must therefore remember to incorporate this in his forex risk management strategy.

There are two general types of risk when dealing with forex risk management and these are: systematic and unsystematic risk. Systematic risk is the risk affecting business aspects such as inflation risk, interest rate risk and market risk. On the other hand unsystematic risks are more specific to the individual events happening to a particular transaction such as business risk and financial risk.

For all the traders out there it is always a good habit to have a trading strategy and you must see to it that both your online broker and your trading platform have forex risk management procedures incorporated into the system. There are many advanced software that contain reliable risk analysis features.

Please check my website Forex Risk Management [http://forexriskmanagement.net/] if you looking for forex risk management tips.

Article Source: http://EzineArticles.com/6325793

Planning and Discipline in Forex Trading

by ’Kunle Adeyeri

The last two articles on education and live trading are a build-up to this one. Education as the bed rock, live account trading as the launch pad and closing on these two to cap it all is planning and discipline in forex trading.

Planning (also called forethought) is the process of-thinking about and organizing the activities required to achieve a desired goal. Planning involves the creation and maintenance of a plan. As such, planning is a fundamental property of intelligent behavior.

This thought process is essential to the creation and refinement of a plan, or integration of it with other plans; that is, it combines forecasting of developments with the preparation of scenarios of how to react to them.

An important, albeit often ignored aspect of planning, is the relationship it holds with forecasting.

Forecasting can be described as predicting what the future will look like, whereas planning predicts what the future should look like. The counterpart to planning is spontaneous order. – Wikipedia

Wikipedia also explains that the phrase “to discipline” carries a negative connotation. This is because enforcement of order – that is, ensuring instructions are carried out–is often regulated through punishment. Discipline is a course of actions leading to a greater goal than the satisfaction of the immediate. A disciplined person is one that has established a goal and is willing to achieve that goal at the expense of his or her immediate comfort.

Discipline is the assertion of willpower over more base desires, and is usually understood to be synonymous with self-control. Self-discipline is to some extent a substitute for motivation, when one uses reason to determine the best course of action that opposes one’s desires. Virtuous behaviour is when one’s motivations are aligned with one’s reasoned aims: to do what one knows is best and to do it gladly’.

The bane of colossal loss in forex trading has to do with lack of proper planning and much more discipline. A forex trader is expected to have a trade plan before execution.

This has to do with determining entry point, size or volume of his trade, entry and exit points, stop loss, trailing profit etc. All these come under planning to achieve a set goal.

Discipline now will focus on executing the plans to the letter. Discipline involves sticking to your trade plan which is backed up by what you have put in the risk management. No matter how your plan is, executing it to the letter is another thing. Supposing you have a trade plan and strategy to roll in an order, discipline will come in if you have the willpower to do so. It will also test if you can stick to your targets in case when price moves in counter direction.

A to-be successful trader must be disciplined. It is a virtue and can be cultivated as well. A disciplined trader will not be too happy because he has winning traders nor be emotionally down if he loses if all were to fall within his keeping to his plans. A disciplined trader will not add more to winning or losing trades. Plan well and be disciplined. Happy trading.