Chapter 13
Risk-Management Considerations
In This Chapter
Understanding the different types of risk
Managing leverage and inflated expectations
Setting up trade plans in terms of risk
Planning for the unexpected
Trading is all about risk, yet it’s frequently the last thing many individual traders think about. Too often, they’re fixated on the expectation of positive trading results, as in “How much can I make?” To a large extent, that’s basic human nature. Why would anyone speculate in anything unless he believed he could win?
We think traders should approach the forex market with eyes wide open when it comes to the risks they’re taking. And we’re not talking about some simple risk formula that comes out to dollars and cents. We’re looking at it from the perspective of an overall risk-taking enterprise philosophy. The more aware you are of the risks you face in the forex market, the more likely you’ll be able to avoid them — and the more likely your success.
Managing Risk Is More Than Avoiding Losses
On the most basic level, risk in currency trading is the same as trading in any ...
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