Strategies

The importance of Risk Management in Forex trading


Foreign Exchange (forex) is the largest market in the world, with a trading volume about $5 trillion each day, compared to about $300 billion on US stock exchanges. People choose forex as a trading vehicle because of the enormous sums that can be made so quickly.

foreign exchange market

The forex market also provides some significant upsides to new investors. These include low barriers to entry, flexible trade sizes, leverage and no expiration dates on their contracts.

An example of someone who turned from the stock market to the Forex market is Bill Lipschutz who turned $12,000 in stocks into $250,000 while attending Cornell University. But he ended up losing it all after one poor trading decision and because of the nature of that market. He then turned to Forex which gave him much more stable platform, a much larger market, and better opportunities to profit. At one point he ended up making $300,000,000 for Salomon Brothers in a single year.

forex trading for beginners

As a young man trading stocks, Bill Lipschutz learned the importance of risk management, and that all trading entails risk. So, it’s impossible to be right 100% of the time when trading even on forex trading.

The difference between those who are successful and those who aren’t comes down to risk management.

Risk management operates on two levels. First at the trade level. Proper risk management at the trade level employees proper stop loss orders and profit taking targets. You never want to risk the entire amount put into a trade. So set good stop losses. The other side is the profit taking target. Once you get into a trade that is profitable, it’s tempting to just let it run and run until you end up giving most of the profits back to the market. This is why it’s important to employ the structure of sell order both above and below the entry price.

The second level of risk management is at the portfolio level. Bill Lipschutz learned early the importance of not risking his entire portfolio on any one trade. Richard Dennis, a profitable commodities trader and founder of the Turtles says:

“You have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a very short period of time. What you can’t afford to do is throw away your capital on sub-optimal trades.”

Dennis recommends risking no more than $2,500 on any one trade when trading from a total account size of $10,000.

Wiseinvest’s AI already knows the importance of risk management and accounts for it when it trades automatically for your with the AI forex trading system and with the AI forex signals system. Every trade is placed with proper risk management and 4 different position sizes already factored in for you making it as easy as just linking the forex broker account or copying and pasting the signals into your the forex brokerage of your choice.

AI is able to improve Bill Lipschutz’s forex trading strategy

When using our automated AI trading or AI forex signals, traders do not need to calculate the figures related to risk management: position size, take profit and stop loss.

The best way to trade forex

There are two ways to invest with our AI in forex:

1. Automated with AI-Trading. Check out the 3 steps to trade automated with our AI.

automated trading with ai bot

Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker Oanda. Click here to open an account.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account and you can monitor the AI trading performance directly on our dashboard.

2. Manually with AI-Signals.

Wiseinvest also provides AI forex signals that perfectly fit into MT4, MT5 and any trading platform. To trade with our AI forex signals, you must simply copy the data you receive from each real-time signal into any forex brokerage account of your choice.

There are five unique variables for each AI signal, and each must be copied exactly, in order to match the performance of the signal as close as possible.

Each AI signal alert consists of the following five data points:

  • Symbol (forex pair)
  • Direction (long or short)
  • Position size (number of units or lots)
  • Take profit (price level to exit with maximum gain)
  • Stop loss (price level to exit with maximum loss)

You can trade forex with our free forex signals clicking here, or with our Premium subscription that provides you unlimited AI signals and automated AI trading in partner brokers. Whether you are a beginner or a Professional forex trader, our AI trading system can help you save time and improve your trading performance. Get started with free AI.

When investing through Wiseinvest automated AI trading or AI forex signals, you do not need to calculate or change the leverage in your forex broker account. Learn more about leverage in forex trading clicking here.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.