How to integrate the bid-ask spread in this matter? I try to keep it low, but is is lowering my choise in possible trades. Anyone?
Trading without risk management is similar to gambling because risk management allows you to implement certain rules and measures to prevent the trade from any negative impact, so if you are not implementing risk management, then you’re taking huge financial risks.
The bid-ask spread is usually high in volatile currency pairs, i.e., exotic pairs, so I’d suggest you should trade major pairs to keep the spread low and incorporate risk management strategies to prevent losing big in case the market trends against you.
It is indeed! Without risk management, you will jeopardize your capital big time. If you are a seasoned trader, then maybe you can escape heavy losses, but if you are a newbie, then you have a huge chance of blowing up your account.
Risk management is like a safety gear that will protect you from the volatility of the forex market. One of the key parts of risk management strategy includes placing a stop-loss at the right level, which protects you from heavy losses at a time when the market starts to trend against you. As far as learning risk management strategy is concerned, then you can use a demo account, which is a trade simulation where you trade using virtual money. Practice on a demo account for a few days, weeks or months to perfect risk management strategy in order to avoid losing more money in unfavorable trades.
It is also a way of life. Ever see what happens when a bad marriage is finally put out of its misery (in the US or any western country)? Depreciating assets can sometimes take half your net worth, and perhaps even half your soul when they are finally written off to zero.
The forex market’s volatility makes trading risky. But if traders have a strong risk management strategy, they can minimise losses. A good risk management strategy involves use of stop losses & target profits and proper allotment of risk to reward ratio.