Sunday, February 25, 2018

Forex: Money Management

February 28, 2010 by  
Filed under Forex Planning, Money Management

With Good Money Management, even you are using the worst Forex Strategy you still can make money in Forex.”

Goh Huang Yong

The purpose of Forex Money Management is to ensure that we do not lose money excessively and it is one of the most important things we should learn before we really go and start trading with real cash.

The money management principles we shared here will guide you how to prevent mistakes that cost you a lot of money, which happened to many new traders and usually the result is that they lose all the money in their account.

Leverage and Risk

First thing we going to talk about is Leverage and Risk. The magic number is 2%. never risk more than 2% of your account balance in any trade. Some mentors allow their trainees to go further more, up to 10%. Anything more than that is a big NO. This gives you the ability to hold against the market fluctuations. If the trade goes bad, you still have capital in your account to try again.

Never assume that you will make money on every trade. A lot of forex traders suggest that it is a good idea to keep your gains huge and loss tiny. So, develop your trading strategy on this notion.

Have a journal on your trading activities. This help you keep track on your profits and losses. By keeping an accurate and detailed records of your forex trading activity, it will help you see whether your strategy is working or otherwise. If all does not goes well, reconstruct your strategy.

If you go and trade and do not make a record of your currency trading, you will never found out the reason and understanding of your profits and most importantly of all, your losses… By keeping a record, you will understand your trades better.

Last but not least, once you develop a strategy. Try it out on a forex demo account. Nearly all brokers give free demo account, where you can practice your strategy and do your trades in real time with virtual money. This also means you risked nothing at first. This is the best way to test out your strategy before you place real cash in the forex battle front.

As reminder, be careful on your mentality when trading with forex demo account. There is no pressure when you are trading with virtual money. However, when you put your money into your forex account. Do not be emotional. And if you do, you will find yourself with totally different results compare your try out on the forex demo account. Usually with more losses. So relax and bring the money in!

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One Response to “Forex: Money Management”
  1. Zac Ng says:

    Strategy is just as important as money management. A losing strategy with good money management will just force a trader to live in delusion and eventually have his account wiped out. The pain will just be prolonged, slow, and torturous. And I would say that’s far worst than bursting ur account quick

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