Proper Forex Risk Management

By Amanda L Stucky 

For those involve in foreign exchange, it is important that you know proper Forex risk management so you can sustain the pressure and for you to succeed in the long run. When you know what the risk involved, you will also be able to find ways on how to lower these risks.

Everyday there are numerous companies and sole traders who exchange currencies on the Forex or foreign exchange. If you are involve in the buying and selling of foreign currencies then you are already participating in spot market. Buying and selling simply means exchanging your currency for another.
To manage the Forex risk, you should know how to use responsibly factors such as leverage, stop loss, lot size and risk reward ratio.


Leverage enables you to use small amount o money to control larger ones. Although this can bring increase your wins, it can also accumulate your losses. So if you're new with Forex exchange, it is best if you work with lower leverage first.
As with stop loss, it serves as your insurance when you are trading. A stop loss can prevent too much loss when exchanging rates.

The risk reward ratio would help you determine whether it is good to trade or if it's better to wait until the next trade. When you know how to work with reward risk ratio, you will still get profits even if there are only 50% chances that you win with the trade.

If you are new to Forex trade there are still things that you should get to know first. You should understand what the difference is with spot market vs. future Forex trading. Although there are risk involve with Forex management, there are several strategies you can use in order to lessen the danger involve. The more you know about these strategies, the more advantageous it is for you.

Forex pathfinder Thursday, September 19 Tradable News.

UK Retail Sales    -    9:30am Paris time   (Thursday, September 19)

--–––––————————————————————–––––--

	Traded pair	Expected figure	Deviation trigger
	GBPUSD	0.4 (%)	±0.4 (%)

	Buy	GBPUSD	if actual figure is or is above	0.8 (%)
	Sell	GBPUSD	if actual figure is or is below	0.0 (%)

Expected move during first 20 minutes after the release is 20 pips or more.


Review historical charts where the same deviation of at least 0.4 (%) occurred:

UK Retail Sales history of charts.

Once there, set filter to Difference Actual-Forecast >= 0.4 and click "Filter" to see list of charts.


  UK Retail Sales    -    9:30am Paris time   (Thursday, September 19)

--–––––————————————————————–––––--

	Traded currency pair	:	GBPUSD
	Initial spike duration limit	:	15 seconds
	Initial spike price action threshold	:	12 pips
	Triggering retracement percentage	:	35 %
	Retracement duration limit	:	40 seconds
	Maximum trade hold time after release	:	10 minutes
	Stop loss	:	10 pips
	Take profit	:	10 pips
	Maximum spread	:	2 pips

USA Existing Home Sales    -    3:00pm Paris time   (Thursday, September 19)

--–––––————————————————————–––––--

	Traded pair	Expected figure	Deviation trigger
	USDJPY	5.25 (M)	±0.40 (M)

	Buy	USDJPY	if actual figure is or is above	5.65 (M)
	Sell	USDJPY	if actual figure is or is below	4.85 (M)

Expected move during first 30 minutes after the release is 30 pips or more.


Review historical charts where the same deviation of at least 0.40 (M) occurred:

USA Existing Home Sales history of charts.

Once there, set filter to Difference Actual-Forecast >= 0.40 and click "Filter" to see list of charts.

  USA Existing Home Sales    -    3:00pm Paris time   (Thursday, September 19)

--–––––————————————————————–––––--

	Traded currency pair	:	USDJPY
	Initial spike duration limit	:	30 seconds
	Initial spike price action threshold	:	12 pips
	Triggering retracement percentage	:	40 %
	Retracement duration limit	:	80 seconds
	Maximum trade hold time after release	:	15 minutes
	Stop loss	:	10 pips
	Take profit	:	10 pips
	Maximum spread	:	2 pips

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.

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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.

Types of Forex Brokers You Need to Know About

By Dragan Lukic

There are various types of Forex brokers available for you to choose from when you start Forex trading so it can be difficult to pick out the best one, especially if you are a beginner. They range from illegal trading floors to international award-winning Forex brokers that have direct access to the market.

 You may be one of the lucky ones that has been told which broker to use through your schooling or you may be a beginner that simply doesn't know where to even start searching. Whatever your situation, the list below will simplify and direct you towards various types of Forex brokers that are available to you:

Retail Forex brokers (market makers) - these are used the most, especially with new traders. Accounts can be easily created online and deposits as small as $100 can be made in order to start trading. The functionalities available are great and the process of trading is quite simple. Be advised to shop around and find out what each broker offers. This could be factors such as live support or instant buy/sell into the market; some could have a small delay depending on their market access which can be quite frustrating.

Institutional Forex brokers (market makers) - The sales angle these types of brokers use is their even more direct access to the market. Unfortunately, because of this feature they require large amounts of capital in order to start trading. Similarly to the above they are also perfect for beginners but because of the large capital requirement, they are usually side-lined until people acquire larger amounts of cash.

Institutional Forex brokers (non-market makers) - unless you are working in a bank you will not have access to these brokers. Large number if international banks trade in this manner where the access is direct to the interbank market.

Spread betters -these are currently only legal in a few countries - this does not include USA. The way in which they make money is different to the traditional manner. Instead of making money on their winnings, they make their money on the spread between two currencies. They usually also include the ability to trade other products like stocks, indices or commodities. As the trade you are putting is a bet in this instance your winnings are not taxable; if you have another form of employment.

The above list and explanations should give you a good idea about the different type of Forex brokers available for your perusal. Just remember to do your research and speak to a few brokers first; before you make a decision on which one to go with. You should probably review your account every year to see if better offers are available elsewhere to make your Forex trading cheaper.

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