When it comes to risk management and money management for Forex, they usually do not distinguish these concepts, considering them to be the same. But in the classics, all the mentioned rules are considered to be complex management, and under risk management, they mean the development of those ideas that contain rule number one, where it is said about the need to stop losing money.
For beginners, this statement seems stupid for some reason, since they usually think that no one in their right mind will want to lose money, but this is not quite about that. In the case of risk management in Forex, rules are created that save the trader from him, excluding from the trading process a situation where psychological pressure can lead to a nervous breakdown.
No trading strategy guarantees that 100 deals out of 100 will be closed as a plus, so you have to accept the fact of inevitable losses. Moreover, the alternation of profitable and unsuccessful transactions cannot be predicted in advance, and, therefore, it cannot be ruled out that at some point the strategy will bring several trading operations in a row, each of which will close in negative.
Accordingly, if a trader will risk many in one transaction, then several failures in a row will cause severe damage to his deposit, after which it will be very difficult to restore, and sometimes even impossible.
In addition, it should not be forgotten that each loss contributes to increased stress. And the more significant it is, the stronger the pressure that the trader’s psyche experiences. However, it does not make sense to explain this, since every trader in his own experience immediately assimilates these common truths.
According to its classical rules, the risk on the transaction should be 1-2% of the deposit amount. That is, a trader, even with 10 unsuccessful deals in a row, which is unlikely to admit any more or less normal strategy, will lose only 10-20% of the deposit, saving enough money to recover.