# Trading foreign exchange needs to control risk

risk control

The foreign exchange market is a risky market, and its risk lies mainly in the variables that determine the foreign exchange price. Although the existing books on the principle of foreign exchange fluctuations can be said to be full of enthusiasm, some study from economic theory, some from mathematical statistics, some from geometric figures, and more from the perspective of psychological and behavioral sciences. Research, but the volatility of the foreign exchange market is still often out of the surprise of investors. For foreign exchange market investors and operators, all aspects of knowledge should have a little knowledge, and knowledge of statistical probability is especially important. The main significance of probability statistics is that it can better help investors make investment decisions, including whether to invest, how to invest, how to deal with accidents, and so on. Therefore, in foreign exchange investment, it is necessary to fully understand the relationship between risk and benefit, winning and losing money. If you don’t have an accurate understanding of these aspects, and you are free to trade foreign exchange, depending on money, then losing money is inevitable.

Optimism and probability

In all the decisions to be made, the first step is to decide how to use your own funds and how much money to use to take risks. When dealing with these issues, it is important to understand the concept of “financial processing.”

There are four main elements in the processing of funds:

1. Personal goals and preferences, including the person’s current attitude towards money;
2. Initial capital and follow-up capital used in the transaction to make an adventure;
3. Expected return value;
4. The probability of losing money.

Forex brokers or investors are doing business in an uncertain atmosphere.

He can’t know exactly what the outcome of any transaction will be. But he can, and he always calculates the probability of various possible outcomes based on his relatively optimistic or pessimistic judgment. What is the probability? Simply put, it’s just a number used to represent a result that reflects what people might think of a certain outcome. The magnitude of this number fluctuates between zero and one. For example, a person may feel that his probability of reaching a goal in a transaction is 0.4; and the probability of not reaching a predetermined goal is 0.6. In this case, probability can be seen as an index that measures whether a person is optimistic or pessimistic about a particular transaction. If he feels that the probability of reaching the goal has risen from 0.4 to 0.5, then we can say that he is more optimistic.

It should be pointed out that the optimism of the person in the above example comes from objective evidence, from news reports, from hackers’ analysis, or from personal intuition. These are irrelevant. problem. What is important is that no matter where the probability value comes from, it reflects an estimate of the chances that a person may have different outcomes. It will affect the person’s next action and thus the market price.