Methods of risk management.

Trading on Forex the investor has opportunities to multiply his money, but he also risks losing future profit and, moreover, invested capital. Deviation from expected profit average is what determines the investor's risk on the financial market.

    This deviation can bring both high profits and big losses.

    Financial risk management does not automatically imply successful trading, but influences it to a great extent. Every currency transaction is subjected to risks, therefore, it is possible to reduce potential losses by applying general methods of risk management:

1. Using stop-orders;
2. Partial investment (investing some part of the money);
3. Trend-oriented trade;
4. Managing emotions.

    Risk management methods are applied after positions are opened. The main risk management method is making orders reducing losses. Stop-loss is a point when the trader leaves the market in order to avoid an unfavourable situation. When opening a position it's better to use stop-loss to insure against extra losses.

    There are several types of stop-signals:

• Initial stop. It determines the percentage of the amount of the deposit that the trader is prepared to lose. With a price moving against position and reaching a level of the position settled by trader, the position is closed with losses.
• Trailing stop. With a price moving together with the position, the stop-signal is used right after it in a proportion determined by the trader. In the case of changing of this tendency the price reaches this signal and the trader leaves the market, but maybe even with some profit (depending on the time this change of price started).
• Withdrawal profit. The position is closed after pay-profit is received.
• Timed stop. If the market can not provide the expected percentage of profit within a certain period of time, the position is closed.