Preschool>= Lesson Status ?
Kindergarten>= Lesson Status ?
Elementary>= Lesson Status ?
Grade 1 Support and Resistance Levels
Grade 2 Japanese Candlesticks
Grade 3 Fibonacci
Grade 4 Moving Averages
Grade 5 Common Chart Indicators
Middle School>= Lesson Status ?
Grade 7 Important Chart Patterns
Grade 8 Pivot Points
Summer School>= Lesson Status ?
High School>= Lesson Status ?
Grade 9 Trading Divergences
Grade 10 Market Environment
Grade 11 Trading Breakouts and Fakeouts
Grade 12 Fundamental Analysis
Grade 13 Currency Crosses
- What is a Currency Cross Pair?
- Crosses Present More Trading Opportunities
- Cleaner Trends and Ranges
- Taking Advantage of Interest Rate Differential
- Obscure Crosses
- Planning Around News and Fundamentals
- Creating Synthetic Pairs
- Euro and Yen Crosses
- How to Use Crosses to Trade the Majors
- How Cross Currency Pairs Affect Dollar Pairs
- Summary: Currency Crosses
Grade 14 Multiple Time Frame Analysis
Undergraduate>= Lesson Status ?
- Why Keep a Trade Journal?
- Benefits of Keeping a Journal
- What Should You Record in Your Journal?
- Potential Trading Area
- Entry Trigger
- Position Sizing
- Trade Management Rules
- Trade Retrospective
- Trading Journal Statistics
- Reviewing Your Trading Journal
- Difficulties of Keeping a Trade Journal
- Summary: Keeping a Trade Journal
Graduation>= Lesson Status ?
- Which Trading Style is Best for You?
- Which Currencies Should You Trade?
- What is Your Level of Trading Experience?
- Should You Be a Discretionary, Mechanical, or Hybrid Trader?
- What Kind of Mechanical System Suits Your Personality?
- What is Your Attitude Towards Risk?
- What Kind of Stop Suits Your Trading Style?
What is Risk Management?
This section is one of the most important sections you will ever read about trading.
Why is it important? Well, we are in the business of making money, and in order to make money we have to learn how to manage risk (potential losses).
Ironically, this is one of the most overlooked areas in trading. Many traders are just anxious to get right into trading with no regard for their total account size.
They simply determine how much they can stomach to lose in a single trade and hit the "trade" button. There's a term for this type of investing....it's called...
When you trade without money management rules, you are in fact gambling.
You are not looking at the long term return on your investment. Instead you are only looking for that "jackpot".
Money management rules will not only protect you but they can make you very profitable in the long run. If you don't believe us, and you think that "gambling" is the way to get rich, then consider this example:
People go to Las Vegas all the time to gamble their money in hopes of winning a big jackpot, and in fact, many people do win.
So how in the world are casinos still making money if many individuals are winning jackpots?
The answer is that while even though people win jackpots, in the long run, casinos are still profitable because they rake in more money from the people that don't win. That is where the term "the house always wins" comes from.
The truth is that casinos are just very rich statisticians. They know that in the long run, they will be the ones making the money--not the gamblers.
Even if Joe Schmoe wins $100,000 jackpot in a slot machine, the casinos know that there will be hundreds of other gamblers who WON'T win that jackpot and the money will go right back in their pockets.
This is a classic example of how statisticians make money over gamblers. Even though both lose money, the statistician, or casino in this case, knows how to control its losses. Essentially, this is how money management works. If you learn how to control your losses, you will have a chance at being profitable.
In the end, Forex trading is a numbers game, meaning you have to tilt every little factor in your favor as much as you can. In casinos, the house edge is sometimes only 5% above that of the player. But that 5% is the difference between being a winner and being a loser.
You want to be the rich statistician and NOT the gambler because, in the long run, you want to "always be the winner."
So how do you become this rich statistician instead of a loser?
While you are logged into your account,
you can save your progress in the School of Pipsology!
- What is Risk Management?
- Drawdown and Maximum Drawdown
- Don't Lose Your Shirt
- Reward-to-Risk Ratio
- Summary: Risk Management