Risk management is a very important aspect of trading, something that you can take advantage of as long as you know how to properly use it. As a matter of fact, risk management is considered as one of the most important aspects of investment strategy that every trader must consider and strictly implement especially when you are using MetaTrader 4.
But unfortunately, with its great purpose, risk management is also the one that is mostly neglected. According to statistics, 90% of new traders tend to lose and fail during the initial stage of trading. This makes them lose hope and quit midway. To find success in trading, you need to always have an effective risk management place and it should be made out of these things;
No matter what market you want to trade to, you must be able to identify your risk tolerance as this will affect your decisions and experiences while trading. The recommended risk per trade should not be more than 5% but for beginners in trading, they can take 1%-2% of their total account value. So, this means that your level as a trader determines your risk tolerance.
Since beginners lack experience, knowledge, and familiarity in the market, they mostly cannot endure major losses. Because of this, it is highly advisable that you use a small percentage of risks. As you trade along, you will get familiar with the market. That’s the time when you can increase your risk levels.
Fact is, your position size is way more important than the entry and exit points in the market. If your position size is too small or too big, you are actually not following the rules of trading and the risk management rules. Either you take too little or too much risk, which makes it harmful to your open positions.
The Forex market is open 24 hours, 5 days a week. Some traders get too afraid to leave their computers because they might miss a good trading opportunity. This is actually unhealthy for you. Professional traders manage their trading time efficiently by making sure that they are available whenever a good opportunity is available. You have to find the right time frame and trading indicators to seize this moment.
Although it is known that the market is only open 5 days a week, it is not entirely close during the weekend. The charts don’t freeze and the prices in the market continue to move. During weekends, there are times when special events happen on weekends or there’s really nothing. There are some traders who prefer to trade during these times and take advantage of the gap.
News announcements on events like central bank decisions, employment, inflation reports, and other news related to the financial world creates large market movements in the Forex market. Always be sure to keep updated with the latest economic news or use some trading tools that will update constantly.
Once you have created a trading plan that you will use in MetaTrader 4, it would be totally useless if you won’t stick to it. A disciplined trader knows his limitations and sticks to the terms stated on the trading plan.