Protect your profits by Two easy ways.

Whatever trading strategy you chose, without any risk management you will struggle to be

consistently profitable.

The key to successful trading is to consistently apply your trading strategy over the long-term.

To keep trading long-term, it’s essential for you to protect your capital.

Here’s two easy ways to ‘stay in the game’.

1. Use a stop-loss

As we’ve established, when you place a live forex trade you become part of the world’s biggest,

most liquid market.

Forex trades have the potential to move very quickly both for and against you, so the first step

in preserving your capital should be to always use a stop-loss.

A stop-loss order helps to manage risk by ensuring that your live trading position is closed if the

market moves too far against you.  Stop-losses are freely available on all trading platforms.

2. Position size relative to your account size

Position size is rarely discussed, but it’s very important.

Trading too small is not normally a problem. Trading too big can be.

There’s always a temptation to ‘bet the ranch’ on one trade. But when it comes to trading ‘greed

kills’.

Firstly, big positions can make trading too emotional – something you want to avoid. If a trade

needs to work, it’s too big for your account.

Secondly, if you risk too much per trade, you risk being wiped out by a bad run of losses.

The best way to think about position size it is to calculate how many losses in a row it would

take to wipe you out.

If you risk 10% of your money on every trade, it would take 10 losers in a row to wipe you out.

If you risk 5%, then that equates to 20 back-to-back losers.

Don’t forget that using a stop-loss order substantially reduces your money at risk. Say you have

£10,000 in total. You decide to do £1,000 trades using a 10% stop-loss on each trade. That

means you are only risking £100 per trade, which is 1% of your total money.

There are no hard and fast rules on how much money to risk per trade. Position size is a trade-off

between keeping risk low enough to survive a bad run but keeping the reward big enough to get

a decent return on your capital.

The answer is a function of your risk tolerance and the consistency of your trading approach.

Don’t forget you can always start small and trade bigger when you gain more experience and

confidence.