Forex risk management involves strategies to minimize potential losses in currency trading, essential for long-term success. Key components include: 1. **Position Sizing**: Determining the capital to risk on each trade, typically 1-2% of the account. 2. **Stop-Loss Orders**: Predefined levels to automatically close losing trades, limiting losses. 3. **Take-Profit Orders**: Set levels to secure profits by closing trades when desired gains are reached. 4. **Risk-to-Reward Ratio**: Evaluating potential profit against potential loss, aiming for a common ratio of 1:2. 5. **Diversification**: Spreading investments across different currency pairs to reduce risk exposure. 6. **Regular Review**: Continuously monitoring and adjusting strategies based on market conditions. Effective risk management protects capital and enhances long-term profitability in the forex market.