The Forex market should be approached with a clear head, and the concept of Forex risk management should be a predominant idea in the mind of any Forex trader; novice or expert.

Know your limits

You know how much money you have. You know how much money you can afford to lose. Although even the average Forex trader believes he will make money trading the market, there will be times of a slump. Every one goes through it. Athletes go through it; why wouldn't a Forex trader go through it? One of the key factors in Forex risk management is to be able, financially, to get through one of these slumps until things start going your way again.

The idea of doubling down, or trying to play catch-up in the Forex market will only hurt a trader and generally what will happen is that you'll dig the hole deeper. Next thing you know, you're on margin call. Not a good place to be for anybody. If the Forex trader has strict, written down, limitations on how much he is willing to lose on any given day and/or any given trade, this is the first step towards successful Forex risk management.

Temper, temper

 The Forex market is emotionless. All markets, for that matter, are emotionless. It's the Forex traders that ruin it. If you become emotional on either side of the trade, whether it's a profit – but particularly when it's a loss, you raise the risk of doing something wrong. It goes against the nature of the market. It only makes sense.

Part of any trader's Forex risk management must be to leave his emotions at the door; or wherever he wants to leave it as long as it's not trading with him at the monitors. The successful Forex trader leaves the last trade and moves onto the next one without any thought of the previous trade. You can not get even with the market, and you're certainly not going to prove the market wrong. The attitude of “I'll show you” should have left your life when you were six years old. Don't bring it back into the market. You'll be having a regular day job in no time.

Figure the odds

 Particularly when you're a less than experienced Forex trader, make sure there's liquidity and movement in the pairs you're trading. You want to be able to not only get into a trade; but also get out of said trade. There are so many factors that you will not be able to compensate for naturally that you don't want to create unnecessary risks when you don't have to. Try to stay as safe as possible in your trading. The concept is Forex risk management; not Forex risk taking.