By Warren Seah – Forex money management has long been a topic shun by many retail traders due to being restrictive to the vast potential of the profits one may gain. It is true that there is a huge potential to gain the market if one is willing to risk some capital but that may be only just an once in a while moment. In order to make consistent and profitable trades it takes just more than just plonking in huge amount of capital into a single trade. It requires forex money management skills to do so.
Ask yourself these few questions to begin with:
1. Do you always lose more than what you are comfortable with in a single trade?
2. Do you always enter more trades than usual when you have just lost a trade?
3. Do you have a threshold of how much you can afford to lose before your account goes bust?
If you have answered Yes to any of the above questions, it is time to re-look into your trading plan and you may want to add forex money management to your planning.
For beginners who are looking to earn big bucks off the market, you are normally eager for huge success in a short period of time but trust me it is also the surest way to burn your account in the shortest time.
It is always advisable to start small with risking amount of money that you are comfortable to the point that should you lose this in a trade, it will not upset your life balance. For starters, risking 1%-2% per trade is good. It allows you to build up your confidence slowly in trading and when you are ready, you can afford to risk more but I would suggest no more than 5% per trade.
There are simple ways to perform money management to your trades which you can explore:
1. Having equity stop in place
-You decide how low you can go before you go crazy over the losses
2. Have a trading time frame
-Trade at times when you are absolutely at ease, cause you won’t want to get emotionally involved with your trade.
3. Don’t over-trade
-Overtrading causes you to lose your focus and putting your money into more trades that you could not afford more to lose
Always keep check of your trading behavior during trades and do a reflection upon your actions after your trades. Document your trading behaviors and rectify them as soon as possible. Forex money management practices are to be encouraged if you want your trading journey to be more successful and consistent.
About the Author
Warren Seah
“Introducing 11 Exit Strategies, What Every Disciplined Traders Need … Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”
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