Those who are not new to the trading profession knows the fact, money doesn’t come easily in the investment business. Being an investor in Hong Kong, you have to take some drastic actions against your emotions. Let’s say, you have a running trade in the GBPUSD pair. The floating loss is $550 and you can easily determine the traders will result in a big loss. So, instead of waiting to get hunt by the stop loss, it’s better to close the trade at the early stage. Such decision-making ability requires a strong knowledge of trading and a perfect understanding of money management policy. Let’s discuss five powerful ways to reduce the loss of trading.
Stop trading with emergency money
Those who are trading Forex and supporting their family, have a financial backup for at least a year. If you start trading with the money that you can’t afford to lose, you are will under extreme pressure. Such mental pressure forces the traders to make an aggressive decision. Though the aggressive decision might give you big profits, think about the long term consequences. Blowing up the trading account is very common when the retail traders become aggressive with their strategy. So, always trade with such money you don’t have to rely upon.
Find your risk tolerance level
Every trader has a different mindset. Based on your mindset, you need to determine the risk tolerance level. If you think you are comfortable to lose 3% of your account balance, never take more risk than that. On the contrary, some of them might think taking 3% risk too high and recovering the loss is much harder. For them taking 1-2% risk per trade is more justified. So, analyze your personality and learn about your risk tolerance level. Based on that determine the risk management policy for your trade.
Trade with 1:4 risk to reward ratio
Trading with 1:2 risk to reward ratio might seem justified but if you analyze the long term goal, you should always look for the quality signals in the trading platform that has the potential to generate a 1:4 risk to reward ratio. If you follow this method, you can afford to lose 4 trades in a row. And a single winning trade will recover the loss. But finding such a risk to reward trade setup is a very challenging task. Instead of doing the lower time frame analysis, you have to become a position trader. There is nothing wrong with the scalping strategy. However, if you consider to lower down the risk, you must have to use the daily time frame.
Use a low leverage account
Using the low leverage trading account is the most effective way to lower down the risk. You can learn more about this from a forex trading broker in Lebanon. Trading with leverage is more like jumping off the running car. If you trade with a high leverage trading account, you are jumping off from the super-fast car. So, if you trade with a low leverage account, you will be jumping off the car which is at rest. So, chose the leverage of your trading account carefully as the profit and risk factors greatly depend on it.
Trade with the trend
Trading with the trend is a very powerful way to reduce the risk of trading. Most of the time the traders are losing money since they place trades against the major trend. So, developing the habit of trend trading technique gives you the perfect opportunity to execute high-quality trades. Once you learn to trade the market with a high level of accuracy, your confidence level will increase. And this will eventually help you to trade in an organized way. Keeping yourself organized is very crucial to your success. Create a trading journal and follow all the rules of the investment business. Never break the rules as it is one of the efficient ways to make a profit even at the complex market condition.
