The following article is on ways to defining your risks and that of Forex Robots.

Money management, risk management, whatever you want to call it is what separates the 10% of traders that are successful from the 90% that are frustrated and losing money. A basic definition of risk management is simply the act of keeping your losses small and not taking undue risk in any given trade. An example of a risky trade might be putting half of your account at risk. Another example might be loosening up on your stop-loss rules and incurring a larger loss than your system allows for.

So how does using a forex robot fit into your risk/reward scenario? This is a vital question to answer because every forex robot has a different set of risk parameters it follows. Knowing this, it’s imperative that you put your forex robot to work in a small live account before upping the ante with more capital. This little test will help you discover if your forex robot is taking too much or not taking enough.

How Much Is Too Much?

It’s hard to put risk into exact terms because every trader has different thresholds for risk. That makes putting a hard and fast number on risk difficult, but there are some worthwhile practices that some traders have used for decades. Many trades say that they will not risk more than two percent of their account balances on any given trade. For example, if you have $10,000 in your forex account, this means you won’t put any more than $200 on the line for any trade. Another way of looking at it is that you won’t accept a loss larger than $200 for any forex trade.

As we said, rules like this don’t work with everyone. You may choose to take on a little more risk or a little less, but if you opt for the former, just remember that you have to keep yourself in the game and taking on too much risk can blow out your account.

Forex Robots And Risk

The best way to deal with your forex robot’s risk settings is to make some adjustments. Use the instruction manual for this exercise. As we said above, not all forex robots are created equal when it comes to risks involved. Remember that a key selling point of forex robots is how much money they’re going to make you NOT how much they can lose. This is one of the reasons why it’s hard to find information on a forex robot’s sales page about its drawdowns, stop-losses and risk.

This is essential information that you can’t go without knowing. Since knowing your forex robot’s risk profile is so very essential to your trading success, don’t cheat yourself by testing the forex robot in a simulated account. When it comes to risk, these results can be skewed against you. You need to see what kind of losses your forex robot takes in a live account before making any transactions.

Author Bio: Francisco Pizarro G. made a career from Forex and left my profession as a Translator almost 4 years ago; since then I work from home in my small office trading the Asiatic markets during night time, where I found a good niche. I am a fan of Forex Robots

Category: Finances
Keywords: Forex Robots, Day Trading, Forex, Forex Brokers, Finacial Advisors, Expert Advisors