Anton Kreil – Professional Trading Masterclass

In this post I will update my road on this amazing course, focused primary on fundamental analysis.

Part 1. Retail traders vs professional traders

A professional trader is someone who gets paid to trade other people’s money.

A retail trader is someone who trades their own money, but not for a living.

To be a successful trader, you can’t be trying to trade for income.

Today we are going to talk about 3 differences between professional merchants and retailers. To clarify, a professional merchant is someone who is paid to exchange other people’s money. And a retailer is someone who trades for his own money, but not for a living. We will review the differences to see what we can collect from the professionals that will help us stay ahead of the competition.

The first difference between retailers and professionals is that professional merchants do not trade for income. If you are working in an investment store, you are paid like a 9 to 5 job. And that is very important because it takes a great psychological load off your mind.

Trading is difficult enough already. But trading to try to earn money for rent is a recipe for disaster. That kind of pressure, whether it’s hitting a winner or not eating, will cause you to make all the wrong moves. First you will start to force your exchanges. And second, it will throw risk control out the window. So remember, to be a successful trader, you cannot try to trade for income.

Now the second difference between professionals and retail is size. Professionals trade millions while retailers don’t trade anything like that. Trading so much money carries great responsibility. When you are moving big, you cannot afford to neglect your business plan. Especially when you have to inform someone as a professional. You need detailed explanations of exactly what you are doing and exactly why you are doing it.

Retail traders are sometimes willing to break their trading plan because the amounts they trade are so small. But this causes the development of terrible trading habits.

The third difference between professionals and retailers is that retailers have more freedom! And that is what makes their position better than that of the professionals.

Part 2 Distributions

Past price behaviour may not be a perfect guide to the future; however it is our only guide. Therefore it is by definition, useful to understand how price movements and returns have behaved in the past. With a sufficiently large dataset, it is probable that over a long period of time the asset behaves similarly to the way it did historically.
As traders/investors, this basic analysis can tell us whether the odds of exposing ourselves to an asset over a given time period provides us with a suitable risk-reward profile for us to make money. Furthermore, calculating a distribution of returns also allows us to investigate other important parameters such as expected return.
Understanding price movements can give an insight into volatility of an asset which can contribute towards setting stop losses, targets and other risk management techniques. In short, the analysis can help us understand the probabilities of making money in an asset over a period of time, while displaying data that can be intuitively applied to establish effective risk management.

Normal or “Gaussian” Distributions are most commonly found in nature and human behaviour. To give some practical examples, a Normal Distribution can explain the probability of being a certain height or IQ level. It is a bell shaped curve, symmetrical around the mean (arithmetic average) of the sample being analysed. Larger datasets will
result in more accurate probability distributions and so in cases where a normal distribution applies, more data will show empirical analysis tending towards normality.
The Normal Distribution is the most commonly used probability distribution within the investment industry, largely because of the simplicity in its calculation. However, traders/investors should be aware that often it is not a perfect representation of asset returns

We can see that a normal distribution fits the data fairly well, and therefore it can be argued that this type of distribution is a good predictor of height variation within the general population (not just the sample used). Note that the x-axis in the second graph has been “standardised” and displayed in terms of standard deviations. “0”
standard deviations from the mean represents the mean height value itself, in this case 180cm, whereas plus and minus 1 standard deviation represent the mean plus (or minus) 10cm which is equal to 1 standard deviation.

It turns out that there are a lot of examples of data which can be assumed as normally distributed, with human height being one of the most obvious. As previously mentioned, asset returns are often estimated using the normal distribution, however due to the financial implications of these estimates it is important to draw your own
conclusions from empirical data.

Part 3 Volatility and Implied volatility

Implied volatility is a volatility measure implied through option prices in the market. It is of particular interest to traders as it is one of the only forward-looking volatility measures we have at our disposal and therefore doesn’t have to rely on historical price data.

In order to explain how this works, we need to understand a little bit more about options.

Options are derivative products that derive their value from an underlying asset. They can be built around a wide-range of underlying assets (or variables), including stocks and indices as well as more obscure assets built around the weather, for example.
A Call Option provides the holder with the right, but not the obligation, to buy an underlying asset at a predetermined price on a pre-specified date.
Similarly, a Put Option provides the holder with the right, but not the obligation, to sell an underlying asset at a predetermined price on a pre-specified date.
So, these options provide the holder with the opportunity to profit from exercising the option (by buying the underlying asset at less than its current spot value, or selling the underlying asset at more than its spot value) without having the obligation to exercise. Effectively, options deliver a payoff profile which only has upside (as you wouldn’t exercise the option if you couldn’t profit from doing so).
At the time of expiry, the payoff to the holder of a call option will be the underlying asset price at expiry minus the predetermined strike price, and vice versa for the holder of a put option.
As an option provides the right, but not an obligation to buy (with a call) or sell (with a put) the underlying asset, the buyer of an option must pay a premium – the price of the option.

Six factors affect the price of an option:

  1. Current underlying asset price (spot price)
  2. Strike price (the price you pay for the asset when you exercise the option)
  3. Time to expiration
  4. Volatility of the asset price
  5. Risk-free interest rate
  6. Dividend payments
    We can consider all of these factors as known parameters, except for volatility, which we have to estimate.

Choosing Option Data and Volatility Smirks and Smiles
So we know that we can calculate implied volatility from real option data, but beyond choosing options based on the underlying asset we are interested in, how we do we know which option to choose?

Firstly, in order to get an accurate representation of implied volatility, you should choose options on underlying assets that do not pay dividends. Beyond this, maturity dates should represent the timeframe in which you wish to investigate the volatility. For example, an option with one month expiry will imply volatility levels
determined by the market that are forward-looking by one month.

Secondly, it should be noted that with all parameters kept constant while varying the strike price, the implied volatilities change. This is due to (Black-Scholes) model inadequacies. Typically, with currencies we get a volatility smile, where implied volatilities are lowest when using strike prices that are “at the money” (equal to the current stock price) and are higher as strike prices get deeper “into or out of the money”

“In the money” call options have strike prices less than the current underlying asset price, meaning that if you exercised the option now you would make a profit. “Out of the money” call options have strike prices that are greater than the current underlying asset price. These payoffs are reversed for put options.
In equities, the story is slightly different and we can observe implied volatilities increasing faster with “in the money” call options compared to those that are “out of the money”. Strike prices close to “at the money” values typically still display the lowest implied volatilities.

Part 4 : Build your framework and how to differentiate between bull and bear markets

Systematic Asset Selection Process

We use a Top Down approach. Using Macroeconomic indicator to eliminate trades that are low probability and isolate potential high probability trades.

For the framework you need : best of Macroeconomics, microeconomics, FA, TA and risk management

Idea generation: A top down approach

Gate Keeping: A screening process will be applied in order to create a barrier between idea and real capital, s that god ideas can be timed well. Usually here we utilize TA and price action indicators

Risk management: Processes are then overlain on the portfolio to ensure discipline

Self-Awareness: Trader Metrics are used to measure the ability of traders on their past trades. This is how we differentiate between good and bad traders.

Questions every trader should ask themselves everyday:

Where has the market come from?

Where is the Market Today?

Where is the Market going?

What does it all mean?

For these we must use historical data to get the perspective of the present and plan for the future.

Keep things simple.

When we have prolonged periods of STRONG stock market performance, we do not want to be SHORT the market. Our trading bias should tend towards being LONG.

When we have prolonged periods of WEAK stock market performance, we do not want to be LONG the market. Our trading bias should tend towards being SHORT.

Bear Market: 20% fall in an index from its high

Bull Market: rise in the index back above the bear market level

Example:

Gross Domestic Product GDP

Nominal GDP: total income of a country in a year

Real GDP: total income of a country in a year with inflation adjusted

Recession: two consecutive quarters of negative REAL GDP growth

GDP: they refer to real GDP

Correlation: If two variables are correlated positively or negatively, they move in the same direction

Leading indicator: An indicator that moves before the Economy as a whole

Lagging indicator: An indicator that moves after the Economy as a whole.

Now lets see how using GDP, differenciate between different approaches towards the market

Part 5 : Correlation indicators

A leading indicator is any economic factor that changes before the rest of the economy begins to go in a particular direction. Leading indicators help market observers and policymakers predict significant changes in the economy.

Leading indicators aren’t always accurate. However, looking at leading indicators in conjunction with other types of data can help provide information about the future health of an economy

Leading Indicators for Investors
Many investors pay attention to the same leading indicators as economists, but they tend to focus on indicators directly related to the stock market. One example of a leading indicator of interest to investors is the number of jobless claims. The U.S. Department of Labor provides a weekly report on the number of jobless claims as an indicator of the economy’s health. A rise in jobless claims indicates a weakening economy, which will likely have a negative effect on the stock market. If jobless claims fall, this may indicate that companies are growing, which is a good indication for the stock market.

Leading Indicators for Businesses
All businesses track their own bottom lines and their balance sheets, but the data in these reports is a lagging indicator. A business’ past performance does not necessarily indicate how it will do in the future. Instead, businesses look at customer satisfaction as a fairly accurate indicator of future performance. For example, customer complaints or negative online reviews often indicate problems related to production or service, and in some industries, may signal lower future revenue.

List of leading indicators:

■ Average workweek of production workers in manufacturing. Because businesses often adjust the work hours of existing employees before making new hires or laying off workers, average weekly hours is a leading indicator of employment changes. A longer workweek indicates that firms are asking their employees to work long hours because they are experiencing strong demand for their products; thus, it indicates that firms are likely to increase hiring and production in the future. A shorter workweek indicates weak demand, suggesting that firms are more likely to lay off workers and cut back production.

■ Average initial weekly claims for unemployment insurance. The number of people making new claims on the unemployment-insurance system is one of the most quickly available indicators of conditions in the labor market. This series is inverted in computing the index of leading indicators, so that an increase in the series lowers the index. An increase in the number of people making new claims for unemployment insurance indicates that firms are laying off workers and cutting back production, which will soon show up in data on employment and production.

■ New orders for consumer goods and materials, adjusted for inflation. This is a very direct measure of the demand that firms are experiencing. Because an increase in orders depletes a firm’s inventories, this statistic typically predicts subsequent increases in production and employment.

■ New orders for nondefense capital goods. This series is the counterpart to the previous one, but for investment goods rather than consumer goods.

■ Index of supplier deliveries. This variable, sometimes called vendor performance, is a measure of the number of companies receiving slower deliveries from suppliers. Vendor performance is a leading indicator because deliveries slow down when companies are experiencing increased demand for their products. Slower deliveries therefore indicate a future increase in economic activity

■ New building permits issued. Construction of new buildings is part of investment—a particularly volatile component of GDP. An increase in building permits means that planned construction is increasing, which indicates a rise in overall economic activity

■ Index of stock prices. The stock market reflects expectations about future economic conditions because stock market investors bid up prices when they expect companies to be profitable. An increase in stock prices indicates that investors expect the economy to grow rapidly; a decrease in stock prices indicates that investors expect an economic slowdown.

Money supply (M2), adjusted for inflation. Because the money supply is related to total spending, more money predicts increased spending, which in turn means higher production and employment.

Interest rate spread: the yield spread between 10-year Treasury notes and 3-month Treasury bills. This spread, sometimes called the slope of the yield curve, reflects the market’s expectation about future interest rates, which in turn reflect the condition of the economy. A large spread means that interest rates are expected to rise, which typically occurs when economic activity increases.

■ Index of consumer expectations. This is a direct measure of expectations, based on a survey conducted by the University of Michigan’s Survey Research Center. Increased optimism about future economic conditions among consumers suggests increased consumer demand for goods and services, which in turn will encourage businesses to expand production and employment to meet the demand.

For more details about any of the subjects, feel free to message me and I will provide more details.

Part 6 Discipline

Although the most part is for forex, it can be applied to all financial markets

Forex risk management is one of the most debated topics in trading. On one hand, traders want to reduce the size of their potential losses, but on the other hand, traders also want to benefit by getting the most potential profit out of each trade. And there’s a common belief that in order to gain the highest returns, you need to take greater risks.

Risk Management In Forex Trading
The reason many traders lose money in Forex isn’t simply inexperience – it’s poor risk management. Due to its volatility, the Forex market is inherently risky. Risk management in Forex is therefore a non-negotiable success factor for both beginners and experienced traders alike.

This is where the question of proper risk management arises. In this article, we will discuss Forex risk management and how to manage Forex risk when trading, including our top 10 risk management tips. This can help you to avoid losses, make more profits, and have a lower-stress trading experience.

The first step to Forex risk management – understanding Forex risk
The Forex market is one of the biggest financial markets on the planet, with everyday transactions totalling more than 5.1 trillion US dollars. Banks, financial establishments, and individual investors therefore have the potential to make huge profits and losses.

Forex trading risk is simply the potential risk of loss that may occur when trading. These risks might include:

Market risk: This is the risk of the financial market performing differently to how you expect, and is the most common risk in Forex trading. If you believe the US dollar will increase against the Euro and you buy the EURUSD currency pair only for it to fall, you will lose money.
Leverage risk: Because most Forex traders use leverage to open trades that are much larger than the size of their deposit, in some cases it’s even possible to lose more money than you initially deposited.
Interest rate risk: An economy’s interest rate can have an impact on the value of that economy’s currency, which means traders can be at risk of unexpected interest rate changes.
Liquidity risk: Some currencies are more liquid than others. This means there’s more supply and demand for them, and trades can be executed very quickly. For currencies where there is less demand, there might be a delay between you opening or closing a trade in your trading platform, and that trade being executed. This might mean that the trade isn’t executed at the expected price, and you make a smaller profit (or even lose money) as a result.
Risk of ruin: This is the risk of you running out of capital to execute trades. Just imagine that you have a long-term strategy for how you think a currency’s value will change, but it moves in the opposite direction. You need enough capital on your account to withstand that move until the currency moves in the direction you want. If you don’t have enough capital, your trade could be closed out automatically and you lose everything you’ve invested in that trade, even if the currency later moves in the direction you expected.
As you can see, there are a number of risks that come with Forex trading! For this reason, the topic of managing your Forex risk is very important. This is why we’ve put together our top 10 Forex risk management tips in this article.

10 Forex risk management tips
Here are our top 10 Forex risk management tips, which will help you reduce your Forex risk regardless of whether you’re a new trader or a pro:

Educate yourself about Forex risk and trading
Control your risk with a stop loss
Don’t risk more than you can afford to lose
Limit your use of leverage
Have realistic profit expectations
Use take profits to secure profits
Have a Forex trading plan
Prepare for the worst
Manage Forex risk by managing your emotions
Diversify your Forex portfolio


Tip 1. Educate yourself about Forex risk and trading
If you are just starting out, you will need to educate yourself. One attitude that will help is to approach Forex trading just as you would with any career, because that’s what it is.

The good news is that there are a wide range of educational resources that can help, including Forex articles, videos and webinars. And when you’re ready to start putting your new knowledge to the test, you can trade Forex using virtual funds in a free demo trading account.

A free demo account allows you to trade the markets risk free. This allows you to understand the trading platform, how the Forex market works and test different trading strategies.

Tip 2. Manage your Forex risk with a stop loss
A stop loss is a tool to protect your trades from unexpected shifts in the market. Simply, it is a predefined price at which your trade will automatically close. So if you open a trade in the hope that an asset will increase in value, and it decreases, when the asset hits your stop loss price, the trade will close and it will prevent further losses. (Just note that stop losses aren’t a guarantee – there can be cases where there are gaps in prices when an asset won’t hit the stop loss, meaning the trade doesn’t close.)

Trading without a stop loss is like driving a car with no brake at top speed – it’s not going to end well.

A good rule of thumb is to set your stop loss at a level that means you will lose no more than 2% of your trading balance for any given trade. Let’s say you have a trading balance of $20,000. Your stop loss should be about 40 pips for a trade, so that if the trade goes against you, all you lose at your stop loss will be $80.

Once you’ve set your stop loss, you should never increase the loss margin. There’s no point having a safety net in place if you aren’t going to use it properly.

There are different types of stops in Forex. How you place your stop loss will depend on your personality and experience. Common types of stops include:

Equity stop
Volatility stop
Chart stop (technical analysis)
Margin stop
If you find you are always losing with a stop-loss, analyse your stops and see how many of them were actually useful. It might simply be time to adjust your levels to get better trading results.

In addition, a protective stop can help you lock in profits before the market turns. For example, once you have opened a position and have a floating profit of $500, you can move your stop loss closer to the current price, so that if it was hit, your trade would close with a profit of $400. If the trade keeps going your way, you can continue trailing the stop after the price. One automated way to do this is with trailing stops.

Tip 3. Don’t risk more than you can afford to lose
One of the fundamental rules of risk management in the Forex market is that you should never risk more than you can afford to lose. That being said, this mistake is extremely common, especially among Forex traders just starting out. The Forex market is highly unpredictable, so traders who are willing to put in more than they can actually afford make themselves very vulnerable to Forex risks.

If a small sequence of losses would be enough to eradicate most of your trading capital, it suggests that each trade is taking on too much risk.

The process of covering lost Forex capital is difficult, as you have to make back a greater percentage of your trading account to cover what you lost. Imagine having a trading account of $5,000, and you lose $1,000. The percentage loss is 20%. To cover that loss, however, you need to get a profit of 25% with the same amount (as you only have $4,000 left on your account, a $1,000 profit is 25% of your new account balance). This is why you should calculate the risk involved in Forex trading before you start trading. If the chances of profit are lower in comparison to the profit to gain, stop trading. You may want to use a trading calculator to measure the risks more effectively.

A tried and tested rule is to not risk more than 2% of your account balance per trade. As mentioned earlier, for a $20,000 trading account that would be just $80. In addition, many traders adjust their position size to reflect the volatility of the pair they are trading. With that in mind, a more volatile currency demands a smaller position compared to a less volatile pair.

At some point, you may suffer a bad loss or a burn through a substantial portion of your trading capital. There is a temptation after a big loss to try and get your investment back with the next trade. But here’s a problem – increasing your risk when your account balance is already low is the worst time to do it. Instead, consider reducing your trading size in a losing streak, or taking a break until you can identify a high-probability trade. Always stay on an even keel, both emotionally and in terms of your position sizes.

Tip 4. Manage Forex risk by limiting your use of leverage
Linked to the previous Forex risk management tip is limiting your use of leverage.

Leverage, in a nutshell, offers you the opportunity to magnify profits made from your trading account, but it also increases the potential for risk.For example: leverage of 1:200 on a $400 account means that you can place a trade for up $80,000 ($400 x 200). On the other hand, applying leverage of 1:500 means that you can trade up to $200,000 ($400 x 500).

This then means that should your trade move in your favour, you are experiencing the full impact of the movement of that $80,000 (or $200,000) trade, even though you only invested $400. While this can mean large profits when the market moves in your favour, the risks are just as high.

Your level of exposure to risk is therefore higher with a higher leverage. If you are a beginner, avoid high leverage. Consider only using leverage when you have a clear understanding of the potential losses. If you do, you will not suffer major losses to your portfolio – and you can avoid being on the wrong side of the market.

Forex risk management is not hard to understand. The tricky part is having enough self-discipline to abide by these risk management rules when the market moves against a position.

Tip 5. Have realistic profit expectations to manage risk
One of the reasons that new traders are overly aggressive is because their expectations are not realistic. They may think that aggressive trading will help them make a return on their investment more quickly. However, the best traders make steady returns. Setting realistic goals and maintaining a conservative approach is the right way to start trading.

Being realistic goes hand in hand with admitting when you are wrong. It’s essential to exit quickly when there’s clear evidence that you have made a bad trade. It’s a natural human tendency to try and turn a bad situation into a good situation, but it’s a mistake in FX trading.

With this mindset, you can prevent greed from coming into the equation. Greed can lead you to make poor trading decisions. Trading is not about opening a winning trade every minute or so, it is about opening the right trades at the right time – and closing such trades prematurely if they proved to be wrong. Always try to maintain discipline and follow these Forex risk management strategies. This way, you will be in the best position to improve your trading.

Tip 6. Manage Forex risk with take profits
Once you have clear expectations, one way to secure your profits is by using a take profit. This is a similar tool to a stop loss, but with the opposite purpose – while a stop loss is designed to automatically close trades to prevent further losses, a take profit is designed to automatically close trades when they hit a certain profit level.

By having clear expectations for each trade, not only can you set a profit target (and a take profit), but you can also decide what an appropriate level of risk is for the trade. Most trades would aim for at least a 2:1 reward-to-risk ratio, where the expected reward (or profit) is twice the risk they are willing to take on a trade.

You would set your take profit at your target profit level (let’s say, 40 pips), and your stop loss would be half that distance from the opening price of your trade (in this case, 20 pips).

In short, think about what levels you are aiming for on the upside, and what level of loss is sensible to withstand on the downside. Doing so will help you to maintain your discipline in the heat of the trade. It will also encourage you to think in terms of risk versus reward.

Tip 7: Have a Forex trading plan for better risk management
One of the big mistakes new traders make is signing into the trading platform and then making a trade based on instinct, or what they heard in the news that day. While this might lead to a couple of lucky trades, that’s all they are – luck.

To properly manage your Forex risk, you need a trading plan that outlines:

When you will open a trade
When you will close it
Your minimum reward-to-risk ratio
The percentage of your account you are willing to risk per trade
And more
Have a Forex trading plan and stick to it in all situations. A trading plan will help keep your emotions in check and will also prevent you from over trading. With a plan, your entry and exit strategies are clearly defined – and you know when to take your gains or cut your losses without becoming fearful or greedy. This brings discipline into your trading, which is essential for successful Forex risk management.

It stands to reason that the success or failure of any trading system will be determined by its performance in the long term. So be wary of apportioning too much importance to the success or failure of your current trade. Do not bend or ignore the rules of your system to make your current trade work.

One of the best ways to create a trading plan is to learn from the experts. Did you know you can do this for free with our weekly webinars? Click the banner below to find out more and registerTip 8. Manage risk by being prepared for the worst
No one can predict the Forex market, but we do have plenty of evidence from the past of how the markets react in certain situations. What has happened before may not be repeated, but it does show what is possible. Therefore, it’s important to look at the history of the currency pair you are trading. Think about what action you would need to take to protect yourself if a bad scenario were to happen again.

Don’t underestimate the chances of unexpected price movements occurring – you should have a plan for such a scenario. You don’t have to delve far into the past to find examples of price shocks. For instance, in January 2015 the Swiss Franc surged roughly 30% against the Euro in a matter of minutes.

Tip 9. Manage Forex risk by managing your emotions
Forex traders need to have the ability to control their emotions. If you cannot control your emotions, you won’t be able to reach a position where you can achieve the profits you want from trading.

Why? Because emotional traders struggle to stick to trading rules and strategies. Traders who are overly stubborn may not exit losing trades quickly enough, because they expect the market to turn in their favour.

When a trader realises their mistake, they need to leave the market, taking the smallest loss possible. Waiting too long may cause the trader to end up losing substantial capital. Once out, traders need to be patient and re-enter the market when a genuine opportunity presents itself.

Or traders who are emotional following a loss might make larger trades trying to recoup their losses, but increase their risk as a result. The opposite can happen when a trader has a winning streak – they might get cocky and stop following proper Forex risk management strategies.

Ultimately, don’t become stressed in the trading process. The best Forex risk management strategies rely on traders avoiding stress, and instead being comfortable with the amount of capital invested.

Tip 10. Diversify your Forex portfolio to manage risk
A classic risk management rule is not to put all your eggs in one basket, and Forex is no exception. By having a diverse range of investments, you protect yourself in cases where one market might drop – the drop will be compensated for by other markets that are experiencing stronger performance.

With this in mind, you can manage your Forex risk by ensuring that Forex is a portion of your portfolio, but not all of it. Another way you can expand is to exchange more than one money pair.

Bonus risk management tip for frequent Forex traders
If you trade frequently, there’s another tool you can use for managing your Forex risk.

One of the main ways of measuring and managing your risk exposure is by looking at the correlation of your FX trades. In stocks there is a common index known as ‘beta’, which shows how the stock is expected to perform depending on changes within the industry. Generally, when trading stocks and aiming to reduce risk, a trader would usually attempt to combine the stocks that would result in a compounded beta that equals zero – as some stocks have positive beta, and others have negative.

What is Forex correlation, and how can it help with risk management?
There is no beta in Forex trading, but there is correlation. The correlation shows us how changes within one currency pair are reflected in the changes within another currency pair. Generally speaking, if you are trading closely correlated currencies (such as EUR/USD and AUD/JPY), you may expect them to have a common trend. In other words, whenever EUR/USD goes down, you could also expect to see a downward trend in AUD/JPY.

So how can this help to measure Forex risk exposure? We all know that risk is mainly driven by margin. This is why you should mainly trade the pairs that don’t have strong positive or negative correlations, as you will simply waste your margin on the pairs that result in the same, or the opposite direction. As a rule, currency correlation is also different on various time frames. This is why you should look for an exact correlation on the time frame you are actually using.

You can manage your Forex risks much better when paying closer attention to the currency correlation, especially when it comes to Forex scalping. Whenever you are engaging a scalping strategy, you have to maximise your gains over a short period of time. This can only be achieved by not trapping your margins in the opposite-correlated assets. Managing your risk is vital if you want to succeed as a Forex trader. This is why you should adhere to the aforementioned principles of Forex risk management.

Forex risk management tips conclusion
Like all aspects of trading, what works best will vary according to your preferences as a trader. Some traders are willing to tolerate more risk than others. However, in most cases, these 10 tips can help you manage, and reduce, your trading risk:

Educate yourself about Forex
Trade with a stop loss
Don’t risk more than you can afford to lose
Limit your use of leverage
Have realistic profit expectations
Use take profits
Have a Forex trading plan
Prepare for the worst
Manage Forex risk by managing your emotions
Diversify your Forex portfolio
If you are a beginner trader, then no matter who you are, the best tip to reduce your risk is to start conservatively. We recommend practising new strategies, in a risk-free environment, with a free demo trading account.

Fortunately, you can start demo trading today with Admiral Markets! With our risk-free demo trading account, professional traders can test their strategies and perfect them without risking their money.

A demo account is the perfect place for a beginner trader to get comfortable with trading, or for seasoned traders to practice. Whatever the purpose may be, a demo account is a necessity for the modern trader.

For more details about any of the subjects, feel free to message me and I will provide more details.

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