Carry Trade Risk.

Because you are a very smart trader, you already know what the first question you should ask before entering a trade is right?

“What is my risk?”

Correct! Before entering a trade you must ALWAYS assess your max risk and whether or not it is acceptable according to your risk management rules.

In the example at the start of the lesson with Joe the Newbie Forex Trader, his maximum risk would have been $9,000. His position would be automatically closed out once his losses hit $9,000.

Eh?

That doesn’t sound very good, does it?

Remember, this is the worst possible scenario and Joe is a newbie, so he hasn’t fully appreciated the value of stop losses.

When doing a carry trade, you can still limit your losses like a regular directional trade.

For instance, if Joe decided that he wanted to limit his risk to $1,000, he could set a stop order to close his position at whatever the price level would be for that $1,000 loss.

He would still keep any interest payments he received while holding onto the position.

Learn to Trade

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