1. Forex Risk Management
If forex traders implement a few risk
management strategies into their
trading programs, the risk associated
with forex trading can be almost
eliminated. Then profits can begin to
roll in!

2. Forex Risk Management

3. Forex Risk Management
Risk Capital – Financial planners say
that you can risk 5% of our liquid net
worth or more risky investments.
Liquid investments include cans,
money markets, mutual funds, etc. If
you do not have enough capital there
re companies that provide capital to
forex traders, so your money is not as
risk at all.

4. Forex Risk Management
Risk Reward Ratio – If you trade the
forex market and take some small
losses and have some large gains to
go with it, this is good risk reward
ration. Make at least 3 pips for each
one you lose and you are on your
way to building a large trading
account.

5. Forex Risk Management
Use Of Leverage – All forex trades use
leverage. Leverage rates are 50:1 to
500:1 depending on your broker. 50:1
leverage meand you put up $1 to
control $50 worth of currency. This is
lowers your risk because you risk less
of your own money to trade. LO

6. Forex Risk Management
Money Management Ratio
Divide the potential number of pips you
expect to make on any trade by the
initial stop amount. If you expect to
make 150 pips on a trade and the initial
stop is 30 this is +5:1 money
management ratio. This is a good ratio.

7. Forex Risk Management
Find an effective trading system.
Having a great trading system is good
risk management. If you demo trade
your trading system and cannot make
any pips move on and find another
system. Do not risk real money until
your demo trade are profitable.

8. Forex Risk Management
Accurate trade entries are the best
risk management of all. Look at the
example trade entry below. The JPY is
weak on all pairs. Due to some EUR
strength the EUR/JPY moved up
strong.

9. Forex Risk Management

10. Forex Risk Management
LO = If you trade based on The Forex
Heatmap® signals, your trades will
become more profitable, this is great
money management.

11. Forex Risk Management
Initial stops should be in the range of
25-40 pips, depending on the pair
you are trading. Then when you go
into profitability, traders can then
move their stop to breakeven.

12. Example Trade Management

13. Forex Risk Management
• Setting and Moving Stops
• In the above example you enter a sell at point
1, and set your initial stop at the yellow line.
At point 2 you scale out lots and move your
stop to breakeven. At point 3 you scale out
more lots or exit if the pair is not trending.
Always use strong real time signals for trade
entries like the JPY strength shown.

14. Forex Risk Management
Profit Taking Rule of Thumb: When you are
up X pips close out half of your profitable
lots and move stop to breakeven on
remaining open lots. Scaling out lots works.
Later in the day check the trends, parallel
and inverse pairs with support and
resistance.
Should I stay in the trade ??

15. Forex Risk Management
• Profit Taking
• You can also take profits by scaling out lots at
intervals as you go deeper into profitability.
For example if you buy 4 mini lots of a pair
you can scale out 1 lot at +30 pips, 1 more at
+60 pips, scale out one more at +90 pips, etc.,
then hold the last lot with a breakeven stop.

16. Forex Risk Management
Practice profit management live with
micro lots.
Money management is much more than
setting and moving stops.
Great forex knowledge, having a trading
system that works, trading plans, entry
management tools, demo trading,
trading 28 pairs, occasionally not
trading mediocre signals – all of this is
good money management.

17. Forex Risk Management
Click on any of the blue hyperlinks for
more information:
Written and illustrated lesson on forex
risk management
Written and illustrated lesson on
scaling out lots and profit taking
Learn more about The Forex Heatmap

18. Forex Risk Management
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