Traders do not invest money in this market knowing that there are no risks. They know this is a volatile industry and they can lose their investment at any time. Most of the time, people develop their risks to reward ratio. This is a strategy where it can predict how much money you should risk in your trade to make a profit. This is very important as, without this ratio, you may not know that you are losing money in your trades although you can be also winning trades. If you have the right risk to reward ratio, you can win money even with many losing trades. We can give you one example that will make you understand how important this strategy is. If you place 10 trades on the market and you do not use the risks to reward ratio, you will always lose your money. Let’s say you win 6 trades and you lost only 4. If you lose 4 dollars in your trades and win 2 dollars, that you will not know because you do not have the risks to reward ratio, you will be in 4 dollars loss. It changes when you use the risk to reward ratio. Even if you lose 7 trades and only win 3, because you are now losing 1 dollar in your trades and making 3 dollars profit in trades, you will have a profit of 2 dollars. Many times, this risks to reward ratio cannot work and this article will tell you what to do at that moment when the risk to reward ratio does not work.
Managing your losing trades is the most difficult task in the investment industry. The new traders are blowing their trading account due to their lack of trading knowledge of risk management factors. If you truly believe that trading is the right profession to secure your financial freedom, you must learn to take the calculative risk. If you take too much risk you are going to end up by losing your investment in a single trade. Trade management is very crucial to your trading success.
You might spot some excellent trade setups but without assessing some basic factors, you should never execute the trade. Ask yourself how much money you are going to lose on a certain trade. Are risking more than 2% of your account balance? You need to keep yourself in the safety zone to protect your investment from the wild swings of the market. CFD trading is an art. You can’t find any shortcut way to become a successful trader. You have to learn three major factors of the market to find best trades at any market conditions. Try to learn from the senior Aussie traders as they have extensive experience in the retail trading industry. If required take some professional course on Forex trading.
Check if the ratio is good to go with your strategy
There are no reasons that this strategy will not work but most of the time, traders do not develop this strategy with their mind. They use one kind of strategy and develop another risk to reward ratio that does not go well with their developed strategy. If your risks to reward ratio is not working, check if this ratio can go with your strategy. Use the ratio on the demo markets and see the result. If the result is good for you, you can try to improve it. If the ratio does not work, develop another risk to reward ratio.
Take help from the professionals
If you think you cannot develop the right risk to reward ratio, take help from professional traders. They can give you the best advice on how to solve it. These traders have a wonderful ratio and this is the secret they are always making money with few amounts of trades.