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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What is Proper Money Management for Forex? by Steve