The Relationship of Risk Management and Investment Strategy in Forex Trading and See How It Will Impact the Mental Health

Abstract

Forex trading, characterized by its high liquidity, leverage and volatility, presents traders with both opportunities and significant risks with each trade. This research explores the relationship between risk management practices, investment strategies, and mental health among Forex traders. Using a mixed-method approach, the study investigates how various risk management techniques, including stop-loss orders, diversification and position sizing, impact psychological well-being. Additionally, it examines the influence of trading strategies such as scalping, swing trading and algorithmic systems on mental resilience. The findings highlight the interplay between disciplined risk management, strategy alignment with risk tolerance and the mitigation of stress and anxiety. This study contributes to the body of knowledge by providing actionable recommendations for integrating mental health considerations into Forex trading practices, ultimately promoting sustainable trading performance and psychological well-being.