Risk Management Techniques for Active Traders

Risk management may not provide large returns in and of itself, but it does, in my experience, ensure that short-term trading does not result in short-term market engagement. When it comes to risk management, there are five essential steps to follow.

Trade Within Your Comfort Zone

Simply said, don't trade too much. It is not required to take full advantage of the futures market's decreased margins. Multiple positions in the same market should be kept for traders with sufficient funds in their accounts to support such a position. In my opinion, a reasonable rule of thumb for managing healthy leverage is to have your margin to equity ratio at or below 40%. Always keep in mind that while earnings increase as more contracts are added, losses also increase on a similar scale.

Stay in the Market

Profitability isn't usually the sole criterion for success. It also relies heavily on sound financial management. The key to being present in the markets is capital preservation and good risk management.

By no means are the concepts I've presented you with the only things to think about when it comes to risk management. But, in all the years I've worked with clients and their accounts, these are some of the least thought, yet most helpful ideas I've come across.

Risk Tolerance 

Before you start trading, you need to determine your risk tolerance, depending on:

Your age
Your knowledge of FX trading
Your experience
How much you’re willing to lose
And your investment goals

It's not only about sleeping better at night or worrying less about currency changes when you know your risk tolerance. It's about feeling in control of the issue since you're investing the appropriate quantity of money in connection to your specific financial condition and financial goals.

Keeping your assets within your risk tolerance will reduce your chances of losing money in the market.

Understand The Markets You Are Trading

It is critical to recognize that some markets are not suitable for everyone, and that trading in highly volatile markets needs enough capitalization and strict discipline. Understand the impact of pricing volatility and how it will affect your account balance. Before trading in a given market, this fundamental understanding must be addressed.

It is critical to comprehend the market being evaluated no matter where you acquire a trade suggestion, whether it is from your futures broker or from your own research. Understanding why the market is where it is, what the market's typical trading range is, and what important events are on the horizon (i.e. upcoming report numbers, news stories, or any other relevant fundamental/technical information) can provide crucial insight into the timing of certain trades and the amount of margin that may be appropriate given your goal. Again, enlist the help of your futures broker in this regard.

Utilize Your Futures Broker

Discuss your risk management goals with your futures broker up front. Ask your broker how much leverage you should use based on your risk tolerance and account size. Discuss your trading style and tactics for reducing risk using appropriate trading strategies.

You may guarantee that your broker understands your risk requirements and expectations by speaking frankly and creating an open, trustworthy relationship. As a result, your broker will be able to effectively function as your trading advocate. Having an extra set of eyes on your account, especially a professional's set of eyes, may go a long way toward helping you control risk and achieve your futures trading goals.

Be Realistic

Know how much money you have in your trading account.
Recognize how leverage may influence it.
Ascertain that you are properly margined for your risk tolerance.


  1. I’m genuinely impressed with your knowledge. You have shared good knowledge by this blog. It was a really attractive blog. Please keep sharing your post with etoro safe

  2. I'm sure you had great knowledge about this. You gave us much information. This information is really good and commentable about bitcoin atm near me . Thanks for sharing your things with us.

  3. I got some wonderful knowledge from this post about healthy habits for teeth. The post is very informative and helpful also. Thanks for sharing such post. Keep it up. Dental equipment dealers Canada.How To Trade Cryptocurrency For Profit

  4. Great post. Articles that have meaningful and insightful comments are more enjoyable, at least to me. Trading Signals

  5. I will share it with my other friends as the information is really very useful. Keep sharing your excellent work. Read more info about linzhi phoenix

  6. Great job for publishing such a nice article. Your article isn’t only useful but it is additionally really informative. Thank you because you have been willing to share information with us.Crypto Exchange site.

  7. Thank you so much for explainaing this. This will be helpful for a lot of people. If you want to be an expert in crypto trading this article can be helpful to you Crypto Trading Strategies