This article looks at the characteristics of high risk forex strategies.
There are a lot of traders who look at the use of high risk forex strategies. It is important that you know about some of the characteristics of these high risk forex strategies. You also have to consider whether or not this type of trading is the right option for you. There are a lot of traders who want the returns that high risk forex strategies offer, but cannot actually handle the risks. To determine whether or not you should be using these strategies you have to consider your risk capacity.
The Characteristics of High Risk Forex Strategies
All high risk forex strategies will be slightly different, but there are some characteristics that they will share. These characteristics will include the proactive trading, the limited analysis that is completed, the volatility of what you are trading and the controls that you have in place. You should consider all of these characteristics when you look at using these strategies.
There are a lot of high risk strategies that will use proactive trading. When you trade with low risks you are going to be trading reactively. This means that you wait for the market movement, verify this and then trade. When you trade proactively you are going to look for the movement in the market and not wait for any verification.
If you are going to be trading with the trend then you will look for the first sign of the trend and then trade. You will not wait for the trend to form and for the momentum to be confirmed. This trading is high risk because you have no way of knowing whether or not the trade is going to be profitable.
The Limited Analysis
The analysis that you complete with some high risk trading strategies will not be as thorough as with low risk strategies. This is often due to the timeframe that you are going to be trading in. High risk strategies will generally have trading that is done on the short-term. As you have to make decision quickly when trading in this timeframe you may not have the time to complete all of the analysis that you want to.
The Volatility of the Market
When you trade with high risk you are generally going to be trading during the volatile market times. The volatility of the market will increase the risks that you take because of the major fluctuations that you face. You should consider how volatile the market is and what you stand to lose on the trade before you start. If the market is too volatile then you may want to reconsider the trading that you are going to be completing.
The Controls You Have
The controls that you have with high risk trading will not be the same as the ones that you have with low risk trading. The controls are the ways that you are going to be limiting the impact of your losses. As you are trading with high risk the losses that you stand to make will be greater. The stop loss orders that you have are likely to be placed quite far from your entry price.