Forex Money Management

By: How To Become A Forex Trader.

You must have been hearing of money management in forex and you must have been told a number of times how very important it is to adopt a workable money management strategy in forex in order to be able to make good profit out of forex trading. If you are new to forex or you have been trading forex for quite a while now and will want to improve on your knowledge and expertise, this write up will open your eyes to a number of workable money management strategies in forex to ensure you do not exhaust your account too fast.

What is money management?

Money management is a series of processes put together to enable you manage your forex account and enable you make consistent profit at a rather steady state without making too many losses. If the truth must be told, money management places some restrictions on you and prevents you from taking certain trading decisions. While those missed trading opportunities may seem to be goldmine at the initial stage, they might make you lose your investment if you had taken them.

Have a plan and stick to it

One of the most important money management strategies to consider while trading forex involves making plans and sticking to those plans. Before you start trading, make up your mind regarding the number of times you want to trade each day, the particular period of time you want to trade as well as how much you want to make per day. Once you have made that particular amount initially decided on, you should exit the market without taking yourself through further risk of trading. If care is not taken, the next off-schedule trading move you make may lead to the loss of virtually all the money you have in your account.

 

Forex-Money-Management

 

Do not try to revenge

There are times your trading moves and decisions will not favor you. You might have predicted that the market would move in a particular direction only for it to move in the opposite direction. When this happens, some rookies may want to make effort to recover the money they lost due to the wrong trading decisions. If care is not taken, they may end up losing even more than they lost initially. You should never put yourself in this kind of situation. If a trading decision goes against you, do not try to take your revenge on the forex market in an effort to get your losses back; you will most probably incur more losses as a result. Once the market moves against you, it is better to exit the market and try again the next day after you must have taken time to assess what went wrong. This way, you can come back stronger and more enlightened than initial.

How much do you risk per trade?

You must not risk too much of your capital per trade. Some experts in forex trading suggest that it is not right to risk more than 1% of one’s trading account or equity. This means that if you make up to 10 different wrong trading decisions, you will still have up to 90% of your account intact. You may be able to make more profit when you risk higher percentage of your equity, but you will also make huge loss if you lose the high percentage you have risked. It is better to grow your account slowly and steadily instead of seeking to grow the account to 7 figures overnight because someone had hyped things up that you can become overnight billionaire in forex trading.

Never forget your take profit and stop loss

Some so called seasoned forex traders are of the opinion that it is not right to set stop loss when trading forex. They believe that the broker may manipulate the market and make it move in the direction of your stop loss, which will lead to loss in trading. This claim had not been verified by anyone. Stop loss is designed to help protect your profit while trading forex. It will also help protect your account and ensure your account is not wiped out in the event a trading move goes against you. Never forget to set your take profit and stop loss when you enter into trade; it is in your best interest.

Adjust your stop loss as the market progresses

If you are already cashing in on a trendy market, you should endeavor to adjust your stop loss in the direction of the trend to help protect the profit you have already made. This will help you to ride the trend for as long as possible, while not losing the profit you have already made.

Conclusion

You need to understand that the money management skill adopted by someone else may not work for you. It is in your best interest to develop a money management strategy that perfectly suits your style of trading. Keep in mind also that forex trading will not make you an overnight billionaire.

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