Types of Forex traders based on risk

Types of Forex traders based on their risk management strategies

We can distinguish three different types of Forex traders based on their choice of Forex risk management strategies. They are classified as follows below

1. A low risk Forex trading strategy: a type of trading where a low risk is taken
Target of 20% return within a year.

Benefits:

• Low risk traders won't use high leverage, hence the probability of losing capital is minor.
• Low risk is very profitable for consistent long term gains as we are targeting a low return.
• Low risk traders won't have effects of emotions on their trading.
• Capital will be safe for the maximum time.

Demerits:

• We may not earn higher profits as we are taking less risk.
• Profits are less compared to medium and high level traders.

2. A medium risk Forex management strategy: are the traders who take medium risk, i.e who might use 1:100 leverage and those who target 100 - 2005 return per year.

Benefits:

• Chances of profit will be more in case a trade goes in our direction.
• Less risk when compared to high risk trading.

Demerits:

• Chance to lose capital is 60-70% as risk is at moderate level.
• Emotions have an impact on them as the we are using high leverage.
• Not so good for long term profits as capital can be lost due to risk we taking.

3. A high risk Forex management strategy: are the traders who use maximum leverage and have no targets, i.e no limits of profit.

Benefits:
Higher profits than low and medium risk traders have.

Demerits:

• Chance to lose the capital is 100% at any time.
• Emotions have more impact on them and make them lose even more due to the emotions by taking more risky trades.
• Not at all good for long term profits.
• Very risky.

Conclusion: - Based on risk we take, we get a respective reward and loss in case of a failure. So, it is up to you to decide which one is suitable for you and trade carefully.

Note: The above article is for information purpose only and is based on personal opinion of article writer. 

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