What is Proper Money Management for Forex?

SetForget Pattern Profit

If you’re thinking about entering the forex market, one of the most important things that you can learn is proper money management.  Even with a great forex trading system, without proper management of your account balance you stand at a high risk of losing a large amount of money in the market.  There are two major parts to money management in forex, setting stop losses and properly sizing your investments.

The biggest, simplest, but also the hardest to adhere to rule for forex account money management is sizing the amount of money you place in each investment.  It should be an essential part of any forex strategies that you employ.  Each entrance you make to the market should be at most two to five percent of your bankroll.  This may possibly deny you of monster gains in one day, but it will also deny you of monster losses in one day.  Remember, even the most successful traders in forex aren’t right 100% of the time and the market is incredibly complicated, so it can be affected by forces outside your control of late breaking news.  Don’t fall victim to this and size your bets so that you can stay in the market for the long term.

Another important part of money management is using stop losses.  Always use stop losses every time that you enter the market.  This will make sure that you don’t end up losing your shirt over one bad bet that you made.  But, it also still allows you to capitalize on the gains from making good bets because it doesn’t make you take a price ceiling.

Setting stop losses and properly sizing your investments are the most important parts of any forex strategy.  They may be simple to implement, but they can make a huge difference in your bottom line.

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Live to Trade Another Day

Pips Wizard Pro

Live to Trade Another Day

I am going to share with you a few reasons why I trade the Forex, and more specifically why I trade advanced Currency Markets. the Forex foreign exchange is popular for a number of reasons but one reason is certainly the ability to have leverage over any account when making a trade.  This means you can take large positions with out having to have a large account balance.  The downside is obviously that you can also loose just as quick which is more often the case when attempting to trade with higher leverage accounts.

FC Forex Braşov
FC Forex Braşov (Photo credit: Wikipedia)

Be patient. Even though you may be tempted to make trades that do not fit within your rules, you must learn to love the fact that your are following your rules just as much as you love to have winning large trades.  The problem with over-leveraging and winning, is that your a conditioning bad habits that will ultimately take you out of the game.  Rarely has a great trader ever admitted to making it by trading with high amounts of leverage in the ACM Forex

Never trade more then 10% of your account when forex investing.    You must never trade more then 10% on any given trade.  This will protect yo in the event that yo have a series of losses that you still have a high enough balance to trade the next day.  For example, if your balance is 10,000 and your were to lose $4,000 on one trade, the next trading you can now only trade with only 10% of the new balance of $6,000.  This makes it much harder to come back over time because you have less money to trade with.  Now if you have followed the rule, you would have only lost 1,000.  Trading the next day is really not much different because even though you had a losing trade you are still trading with 90% of you account.

What most people don’t realize is that when taking a large hit in the market dur to over leveraging, you have now cut you balance in half to try and slowly work your way back.  Most will try to regain there losses quickly and often dig a bigger hole only to get taken completely out.

Avoid this al together by simply appreciating smaller more sustainable gains in the Forex, rather then larger gains.  This will naturally protect against the downside and create a pattern of controlled trades that are proportionate to your balance.

The key here is if you have 7-8 trades that went against yo in the market, you can still recover reasonably well.  Live to trade another day