Profit and loss ratio when trading forex.

One of the basic rules of trading on the Forex exchange is the preliminary calculation of the desired profit and the maximum allowable loss.

Often, novice traders do not want to think about this issue; as a result, the decision made leads to a lack of profit or excessive losses, and both options have an equally negative impact on the financial result of trading.

In order to increase the efficiency of trading, you need to influence both increasing profits and reducing losses; some beginners do not even realize how closely these two concepts are related in Forex.

Usually the situation develops according to several scenarios:

1. The first “Deplorable” - the absence of a clear framework for maximum losses almost always leads to the loss of the deposit. A trader, having opened a trade in the wrong direction, hopes that the counter movement of the exchange rate is just a correction that will end soon. At the same time, the deposit simply melts before our eyes until the deal is closed by stop out .

You should always know how much you can afford to lose from one trade, whether it be a percentage or a certain number of points, the main thing is to always follow the established rule.

Here lies a purely psychological moment, due to which the greatest losses appear. 2. The second “Unnoticeable”: every time a new deal is opened, you should clearly know how much you can earn, exactly what you can, and what you don’t want.

Since, firstly, excessive action is punished by a trend reversal and losses, and indecisiveness is punished by a loss of profit. It would seem that the worst thing is that I closed the deal a little earlier and earned only 20 points instead of 50, but I still left with a profit.

But if you consider that all Forex trading consists of unprofitable and profitable transactions, there is no guarantee that this approach will not produce a negative result. The basis for calculating possible profit is the volatility of the currency and the historical dynamics of its movement.

As a rule, price correction prevents you from getting maximum profit; fear of a trend reversal forces you to immediately close existing positions. The remedy in this case can be constant market analysis, even with an already open transaction, and the best signal to close it will be a signal to open a position in the opposite direction. Money management in Forex has always been the key to successful trading, so this aspect is one of the main ones in trading.