Forex Trading Risk Management

Question 1

What is a stop-loss order in forex trading?

Accepted Answer

An order that automatically closes a position at a specified price to limit potential losses

Answer

An order to stop trading permanently

Answer

An order to buy more currency

Answer

A request to the broker for a refund

Question 2

What is the recommended maximum risk per trade for forex traders?

Accepted Answer

1-2% of account balance per trade

Answer

50% of account balance

Answer

10% of account balance

Answer

There is no recommended limit

Question 3

What is margin in forex trading?

Accepted Answer

The minimum amount of capital required to open and maintain a leveraged position

Answer

Profit from a trade

Answer

The spread between currencies

Answer

A fee charged by the broker

Question 4

What is a margin call?

Accepted Answer

A notification that your account equity has fallen below the required margin level, requiring additional funds or position closure

Answer

A phone call from your broker to chat

Answer

A call to increase your leverage

Answer

A request for account verification

Question 5

What is the risk-reward ratio?

Accepted Answer

The relationship between the potential loss (risk) and potential profit (reward) of a trade

Answer

The ratio of wins to losses

Answer

The interest rate ratio

Answer

The ratio of leveraged to unleveraged funds

Question 6

What is position sizing?

Accepted Answer

Determining how much of a currency to trade based on account size, risk tolerance, and trade setup

Answer

The physical size of your trading desk

Answer

Always trading the maximum amount

Answer

The number of open positions