{x} | Trading.live

When people first come to trading and in particular forex, the first thing they do is to find the fanciest trading system they can. The thinking goes if they can just find the latest and greatest system – all their dreams will come true and the millions will come rolling in. Whilst a solid and profitable trading method is needed to make money trading, if the trader does not use a proper risk control to fit that system or method, the best trading system in the world is not going to help them.

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 control 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

5 ways to control risk when trading forex

Many of these suggestions can be implemented quite easily and quickly. But the true obstacle to implementing these ideas will be your own inner self-biases.

1. Trade with a hard stop loss

One of the best ways for traders to contain risk exposure in the markets is by placing a hard stop loss with every trade, rather than a mental stop loss.

So, what’s the difference? A hard stop loss is active in the market and will be executed upon when prices reach that level. It is automatic and doesn’t require the trader to do anything more once it has been placed. A mental stop loss is typically defined as a level at which a trader has decided to exit the trade, but has not initiated a stop loss order in the market.

2. Do not use excessive leverage

When it comes to trading the FX markets there is no guarantee that you will make money. However, I can almost guarantee you that if you do not use leverage responsibly, then you will blow up your account at some