Risk management involves strategies to minimize potential losses and protect your trading capital. Key risk management techniques include:
- Position Sizing: Determine the appropriate lot size for each trade based on your risk tolerance.
- Stop-Loss Orders: Set stop-loss levels to automatically close losing trades at a predefined point.
- Risk-Reward Ratio: Aim for a favorable risk-reward ratio (e.g., risking $1 to make $2).
- Avoid Over-Leveraging: Use leverage conservatively to prevent excessive losses.
- Diversify Trades: Avoid putting all your capital into a single trade or currency pair.
