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Lesson 7 of 8
Risk Management & Psychology
Forex Risk Management
Due to high leverage availability, risk management is CRITICAL in forex. Most retail forex traders lose money, largely due to poor risk management.
Position Sizing
Rule: Never risk more than 1-2% of your account per trade.
Lot Size = (Account × Risk %) / (Stop Loss in Pips × Pip Value)
💡 Example
$10,000 account, 1% risk = $100
Stop loss: 50 pips
For EUR/USD (standard lot = $10/pip):
$100 / 50 / $10 = 0.2 lots
Leverage Guidelines
- Beginners: 5:1 to 10:1 maximum
- Intermediate: 10:1 to 20:1
- Advanced: Based on strategy requirements
Trading Psychology
FOMO
Chasing moves you missed. Wait for your setup, there's always another trade.
Overtrading
Trading too frequently. Quality over quantity. Fewer, higher-quality setups.
Revenge Trading
Trying to win back losses immediately. Take a break after losses.
Moving Stop-Loss
Widening stop to avoid loss. Never do this. Accept the loss.
Trading Journal
Keep a journal of every trade. Record entry, exit, reason, emotion, and lessons learned. Review weekly to improve.
📋 Key Takeaways
- Review this lesson's material before moving on
- Practice the concepts on a demo account
- Take notes on what you've learned