When many traders are losing their money in Forex there are also a lot of traders who are making their fortune. If you look at the market of Forex, you will find that most of these traders only lose their money. They have no strategy and even if they have, they are still losing their money. It is because of their risks to reward ratios which is very important in Forex. When you are trading in Forex, you should know how much risks you should take for your trades. If you are taking 10-dollar risks for your 1 dollars, it is not going to work well. You will lose all of your money when you lost your trades and this is what happens to most of the traders in Forex. They trade with no risks to reward ratios and it cost them their money. This article will tell you how you can save your money from the ever-greedy market of Forex by developing your risks to reward ratios. It is very easy to develop and you will find that your trades make more profit when you are following it. With the right risks to reward ratios, you can have more profit in your market even if you lose more trades than you win.
Spread betting
Spread betting is very much similar to currency pair trading. If you can predict the future price movement with an extreme level of accuracy then you can easily make lots of money. Trading the financial instrument in the global market involves a high level of risk. In spread betting, most of the traders use margin to maximize their potential profit. Though margin trading is extremely profitable yet you should be extremely careful about your risk management factors. If you risk a $100 in a single trade then you need to make sure that your potential gain is $200.To be precise always maintain 1:2 or higher risk-reward ratios to master the art of trading.
Being a new trader everything will be a little bit hard for you. For this very reason, the expert traders in the United Kingdom always suggest the new retail traders open spread betting demo account. In the demo account, you can easily develop your trading system without risking any real money.
Never take risks in percentage
The first rule of developing your risks to reward ratio is to never take your risks in percentage. If you take your risks in percentage, your account will be in risks. If you see one example, you will understand why it is a never a good idea for taking risks in percentage. You have a 100-dollar account in Forex and you would like to trade the market with all of your money. You place 10 trades on the market and you are taking 2% risk for each trade. If you lost all of your trades which is very normal for traders in Forex, you will see that you have lost 20% of your investment. This is why many traders cannot trade the market after some months as they lost all of their money. When you take risks in dollars say you take 1 dollars of risks for your 10 trades, you will lose only 10 dollars. If you take half dollars of risks, you will lose only 5 dollars. Your account will always be safe when you take risks in amount.
Your winning is bigger than loss
It is the second rule of developing your risks to reward ratio. Your winning should have to be bigger than your loss. If you take risks for half dollars in your trades, the profit should be set for 2 dollars. Imagine if you have lost 5 trades and win 5 trades. You will lose 2.5 dollars in your trades and the winning trades will bring you a profit of 10 dollars. You will still be having profit and this is how risks to reward ratios work. All traders lost but with the right risks to reward ratios, they make the profit.
