Risk management in forex trading refers to the process of identifying, assessing, and controlling potential risks in order to protect trading capital and minimize losses. It involves making informed decisions about the amount of capital to risk on each trade, setting stop-loss and take-profit levels, and using risk management tools such as hedging and diversification. The goal of risk management is to achieve a positive risk-reward ratio, where the potential reward of a trade outweighs the potential risk. By managing risk effectively, traders can avoid large losses and ensure long-term profitability.
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