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FOREIGN EXCHANGE IN INDIA

RISK MANAGEMENT IN FOREIGN EXCHANGE IN INDIA

While trading in Forex in India, any trader may face some risks. It is natural as risks are integral part of any transaction in Foreign Exchange market. Because of fluctuating currency rates being the object of trading in Fx market, the emergence of risks comes to be quite natural.  Diminishing all the risks is practically impossible. Minimizing them- this is what can be controlled by the traders. This phenomenon is called risk management. Risk management presents itself a set of some rules and regulations, allowing to decrease the level of risky trading operations, as well as to close the open positions with minimal losses. Risk management involves some tactics and strategies necessary for controlling the deposit.

The main principles that a trader of Foreign Exchange in India may follow in order to realize risk management are:

1.      Controlling emotions

In order to record real successes in Forex trading, one should forget all his emotions and judge with cold head. Basing on emotions may mislead us, causing some losses.

2.      Diversification of investments

It is not advisable to fund all the means in only one position. It will be better to use the deposit for opening three positions simultaneously. So, if you intend to become a consistent and smart participant of Foreign Exchange in India, learn to control your capital.

3.      Low leverage

It will be more effective to choose low leverage for several transactions, than a high leverage for one transaction, hoping to make notable profit. In this case the profitability of all your transactions will increase in several times.

4.      Stop-loss order

Always fix stop-loss order in your trading platform. This is a useful instrument for minimizing your possible losses. Don’t be greedy. If the trend is moving in the direction contrary to your expectations, it usually means that this trend will continue. So, closing the position in this case will serve in your favor.

5.      Trade with only liquid currency pairs.