There are five kinds of trading risk management that can be used, we can use one or all of them depend on the willingness and ability of the risk to be borne by the trader.
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1. Stop Loss / Stop Loss Order
This technique is the easiest technique in which the risk that we take only limited to how many points we have set (eg 30 or 50 points from the price that we take). To use the stop loss technique we give a stop order below the price when we buy (buy order) or above the price when we sell (sell order).
Example: If we buy EUR / JPY 117.00 we put the stop loss / stop sell order at 116.50
So when the price falls to 116.50 points we have only 50 losses.
2. Limit Order
This technique is a technique of orders booked in the position we set their own prices. The price we set for entry of buy or sell a position, so if the price is not achieved then we will not experience losses and expenses. Limit order valid until the time of closing the New York Market (Good Till New York), the market closing Friday (Good Till Friday), or until the limit is canceled (Good Till Cancel).
Example: We put a limit order buy USD / JPY at 116.00 then the price just went down to 116.50 and then back up to 117.00, so the limit is not subject to proficiency level in these orders which then can we cancel the order.
3. Hedging / Locking
This technique is widely used techniques of traders, but this technique should be used with careful calculation. This technique has risks because we have to analyze when we opened the hedging / locking position. We will also charge a commission charged with costs and interest swap two times, so we have enough funds to pay those costs. This technique is used trader who did not want to loss altogether.
Example: If we buy EUR / JPY 117.00 and Sell USD / JPY at 116.90 117.00 Buy we open a position if prices rise above 117.10 and 116.90 open sell position if the price falls below 116.80.
4. Switching / Turn Over
Technique is a technique to change the position, where if we make the wrong position we throw / liquidate positions we have and replace with a new position in the opposite direction.
Example: If we buy EUR / JPY 117.00 116.80 then the price went down to buy us liquidate these positions, then take a new sell position at 116.80.
5. Average
This technique is a collection of engineering positions, where we add the same position at different prices. This technique is a technique that requires large capital, but also large potential profit.
Example: If we buy EUR / JPY 117.00 116.50 then the price falls on us and then buy again for 116.50, and if the price dropped again to 116.00 for we buy it again, then release it all in the position if the price rises to 117.50.
