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Make your risk-reward favorable in currency trading

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    Make your risk-reward favorable in currency trading

    You cannot get a trader who can say they have developed a perfect risk to reward ratio. It is because the market is unpredictable. You may think the trend will go up and your analysis is also showing the same result but to your surprise, you will discover that the prices are going down. It is not uncommon and many people have lost their money. The only way you can keep afloat and make your profit is by making your risk to reward favorable. This article will explain to you how you can make this ratio favorable and you can have a good time trading the market. If your reward plan is not favorable or it is risky, you can end up losing your investment.

    Negative risk reward ratio
    Many Singaporean traders often claim they have a very solid strategy. Due to such overconfidence, they even place a trade with the negative risk-reward ratio. This eventually results in a huge loss in the long run. Starting from the institutional ending with the full-time day traders, everyone is more concern about their risk management policy. To be precise, their main concern is the safety of their investment. Regardless of the quality of the trade setup, they never risk too much to earn huge amount of money.

    Managing your profit
    It’s very obvious, you are here to make money. You will be doing extensive analysis in your advanced online trading platform only to have the best trades. Let’s say you have made a decent profit after one month of trading. So what would you do with your profit? Do you think it’s a better idea to withdraw all your profit? The professionals withdraw only a certain percentage of the profit and reinvest the money to make the size of their account bigger. Such organic investment helps the traders to compound their profit.

    Only afford what you can lose, it should not be harsh
    Many people want to invest in Forex but most of them do not. Do you know the reason behind their choice? It is because they cannot afford to lose the money they have. They earn a small amount of money every month and they know about the risks. They know the novice traders are bound to lose their investment in the first months. As they do not have other incomes, they hardly can make up their mind in depositing money to trade. These people are smarter than the traders who make their risks bigger than their rewards. Whatever you have in your mind, always make sure that your risks to reward is afforded by you. If you afford to lose only 19 dollars, do not exceed the amount. Make the ratio that it can highest lose your 10 dollars. This way you can accept your loss and it will not slow down your career. People aim beyond their capacity and they suffer the losses.

    The reward should always be higher than the risks
    If your amount of reward is higher than the losses in your trades, you can still make a profit even if you have more losses than wins. This small example can make you explain the importance of a higher reward than risks. Most people only try to make 2 dollars in profit but they are unaware that every trade is worth 2 4 dollars risks. It is at the need when they know they have losses in their trades. Always make your reward higher and it will give you more money that can compensate for your losses.

    Analyze the number of risks for your reward
    Do not depend on your smart brain. Use analysis and know the actual result. The result may vary in live trades and that is why you also need to demo trade with your risk to reward ratio. It is how you can make a risk-reward favorable to your accounts and your trades.
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