Risk Management

Hello friend how are you?? At this time I wanted to share some knowledge to you all. Ehm .. The information will I give to you is about risk management techniques.

The reason I wanted to give this information is to protect you from the dangers of Forex Trading.

Ok .. us to the subject matter.



1. Cut loss

Is an act of closing your position opposite the market price movement. Cut loss function to reduce the losses that we experience that will not cause greater harm.

For example, when we're opening a position on the Open Buy GBPUSD at 1.5000 price, then we certainly are looking forward prices rise above 1.5000, so we make a profit. We hope that the price move keposisi 1.5100 so that we can get 100 points profit. However, prices move opposite to what we expect. Prices moved down from the position of 1.5000 to 1.4980, and still showed a tendency to fall.

At this time we'd better close the position even though we had to lose 20 points (1.5000 to 1.4980 = -20 points). And, action is what is called the cut-loss losers closed position to prevent greater losses.

2. Switching

Is an action that the same can be said to cut losses, will have a different switching with cut loss. The difference is in the closed position when we are losing, we opening new positions in the same direction with the market price movement.

With, for example equal to cut losses earlier, then we remember that we have closed our position at 1.4980 level and then we opened a new position or commonly called by the name of the Open Sell because prices tend to decline. Thus, if prices continue to fall until it reaches 1.4900 so we have a whole 20-point loss but earn a profit of 80 points (1.4980-1.4900 = 80) so that the total profit we still get 60 points.


3. Averaging

The following steps may be badly in need of extra capital to maintain our position has been opened which was moving against the market price. Let's take the example of the Loss Cut above case, if we want to take action averaging then we opened a new position but in this case is not like switching our positions are close losses and then open a new position as opposed to our previous position by reason prices have been move down.

In averaging we are not closing our positions have been opened or commonly known as the Open Buy and even we add many new positions open in the same direction of the Open Buy back!

We do it because the price has decreased so prices will likely rise again. And that's when we do Open Buy a second in the hope the price goes up even beyond the Open Buy our first so we get a double advantage.

Such risk management techniques can I give to you. Hopefully this information is useful for us all.