Important Aspects of Money Management

Money management is a crucial part in the field of forex trading because if you don’t have such a strategy plan then your account could be instantly wiped out. 

One example is placing an order with a huge equivalent amount of pips that could drain most of your capital when you made the wrong speculation. 

If you have a perfect money management plan then losing just once or even more times will not still provide any threat on your investment account’s depletion.

The simple function of a money management is to protect your investment and to survive in the longer term where you can accumulate back your previous losses and most likely to gain profit. 

The following are some important aspects that we need to consider on out MM strategy.

1.) Understanding the Risks

Some traders say that the standard percentage in risking your trades is no more than ten percent (10%) but I think that this amount is still quite high. 

To stay on the safe side, it’s better to use around 1% to 2% percent only of your trading account balance.

The reason about using a very low percentage of your funds is that you can endure the worst volatility of the market that might unexpectedly happen. 

If you already have some experiences in trading the forex market then you should probably know that some of your trades could go in the wrong direction. 

Let’s consider the fact that it happens but through your MM method you are able to sustain the lose

2.) Losing is a part of trading

You have to know that there is no perfect strategy or method that often wins most of the time. 

Even professional forex trader losses on some of their trades so don’t get disappointed every time you acquired losses. Just keep on practicing and gaining knowledge. 

Learn from your mistakes and never give up.

3.) Keeping a Journal

It’s a good idea to keep a report about your gains and losses to track your progress. 

Record the number of your wins and losses on any document tools that you prefer to use such as an Excel, Microsoft Word, or simply on a notepad. 

At the end of the month, study your over all results and your strategy should have produced more number of winnings as compared to the number of your losses. 

If it happens that the numbers of your losses are more than your winnings then you have to make some necessary changes on your trading style.

4.) Virtual account

They say that a Virtual or Demo account is completely useless because you are not dealing with real money and there are no thrills or fear about losing and gaining a real value of cash. 

I mentioned on my previous post that the use of such account is to help a newbie familiarize them selves about the platform. 

Anyway, it’s all upon yourself whether you are learning something from a demo account but if not then you should probably try switching into a real account.

5.) Sufficient amount of investment

Before even trying to place an order, you have to analyze your account if you have enough money to place a trade. 

Traders who have a limited amount of capital are the once suffering stress and often ended wiping out their account.

6.) The Comfort Zone

A comfort zone means it’s the amount of money that you are willing to lose. It’s is a similar case when you are trying to gamble where you have to bet the amount that you can only afford to lose. 

Do not risk some insane amount that could finish your trading career.

7.) Claiming your profits

There’s no other good experience about trading forex besides collecting your profit to spend on your happy daily life. 

At some point, you could simply let your capital grow and increase position size to acquire a higher amount of profit returns.

Profit

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