Risk management strategy | ForexGen

Another smart risk management strategy is to avoid holding positions in two currencies which tend to move together like the British Pound and the Euro. These currencies are correlated. The most common pairing of currencies is the US Dollar and the Euro. Since the British Pound and the Euro typically move in the same direction up or down, you should look to select a second pairing of the US Dollar with a currency other than the British Pound.

You should also avoid taking a long and short position in currencies which generally move in opposite directions. This is the same situation - you are taking on more risk than you need to.

And finally, leave the gambling urge to the casino crowd. If you’ve lost money on your previous few trades, don’t double-up your next trade in order to “recoup� your previous losses. Your odds of profiting on your next trade won’t increase as a result of your previous losses. The odds of winning remain 50-50 every time you trade.