Trading back then used to simply mean an exchange by either barter or money. We are still trading until now and as we can see the management risk in this daily routine is easy. For example, checking the quality of the sold goods or services provided is part of the risk management. We are doing the same thing now while learning forex, but the differences are significant.

Since the internet has been around and the transaction’s speed has increased further up, risk has become something that is hard to control. Everything is shifting towards instant transaction, as well as instant profit which makes it even more addicting and is getting closer to gambling, which needs no analysis unlike online trading.

The difference between the two is located on the risk management itself. Gambling requires little to no management and pouring everything down to luck. There is no control over the risks when it comes to gambling. It is not about what is being done or played, it is about the mindset that comes with it. 

Calculate the risks

When it comes to knowing and calculating the odds of a successful trade, there are lots of analysis to be done. From how the market works to understanding others’ trading behaviors, it is important for you to understand how to analyze first. Fundamental analysis that looks the global trend and technical analysis which is all about chart.

Both fundamental and technical analysis are important for this matter. They will help you make decisions that you need. From there, you can understand what kind of risks you are facing, measure it and then manage it as much as possible. Therefore, you really understand where you put your money into and where it is potentially growing.

What to see?

When you are just learning forex, you should determine how much the risk you are taking for every single trade. You don’t want to lose your capital, so a small percentage as low as 2% of your capital should be good for you. But how do we measure the risk itself? You can start from observing the liquidity and leverage.

Whenever you are investing on something, knowing about its liquidity is a must. Liquidity means how much your money, when traded, is easy to be turned back into a form of money. Forex market is fine for this as it is very liquid, but you should consider checking the liquidity of your broker, so that all of your trade is executed effectively.

Leverage is when you deposit a certain amount of money, but you can trade 100 times the amount of that. You are using the money of your bank or broker instead of entirely using your money. The combination of the high liquidity and leverage of the forex market is the reason why forex is one of the most favorited form of investment.

But, this means that the risk management can be quite confusing as everything becomes really quick, if compared by the other markets. Yes, you can make a profit in seconds but the losses that you are going to experience will happen just as quickly. This takes a lot of decision making and a huge responsibility.

Conclusion

While learning forex, you will encounter the time when you have to do a lot of risks taking. This is not supposed to be a blind way of trading. There are things that you can do to support the reason why you are doing a certain thing in the forex market. This is called managing risks and every step you take should always pass this.