Risk management is essential in forex trading to protect your capital and ensure long-term success. This involves determining how much you are willing to risk per trade, setting stop-loss orders to limit potential losses, and using proper position sizing based on your account balance and risk tolerance. Traders should never risk more than a small percentage of their capital on a single trade, typically between 1% and 3%. By focusing on risk management, you avoid the emotional pitfalls of trading and maintain discipline. Additionally, diversifying across different currency pairs and avoiding over-leveraging can help manage risk. Always have a clear trading plan and stick to it, adjusting your approach as market conditions change.