Not all traders might understand it but money management serves as an important part of your trading plan. Without the use of the right risk management plan and money management plan, you are most likely gambling rather than trading. As far as traders are concerned, even professional traders who have a lengthy portfolio of success and profits or those who have reliable MyFXBook still use these management plans. Although a profitable trading strategy helps in bagging profits, it won’t stand still without the correct use of risk management and money management plans. To help you start right in your Forex trading journey, here are the 10 money management tips that you can use in your trades.
Determining your risk per trade allows you to point out the amount that you are willing to lose every time you open a trade. This risk-per-trade should not be more than 2-3% of your trading funds. This way, you can still withstand a negative blow to your account. Remember that losses and inevitable in trading. But these small risks must not affect the growth of your account. Funds should flow steadily for your long-term progress.
It is not necessary to enter every trade in the market, every day. Patience is a virtue not just in life but in trading as well. Wait for the right trading opportunity and remember that the market doesn’t owe you anything. Even if you use the best trading strategy, without patience and discipline, you will still fail in the market.
If you know that you are on the losing end, don’t try to overturn the market, hoping that you can still cope with your losses. As professional traders say, “Cut your losses short and let your profits run” – they tend to be impatient when it comes to closing a losing trade. They accept the losing position and move on from it.
As part of the risk management strategy, a stop loss is very effective in stopping huge losses. This tool also closes the position automatically if a position reaches a certain level of loss. It makes sure that you won’t acquire huge losses that could leave a dent in your trading account. Therefore, when you enter a trade, don’t forget to use a stop-loss order and stick to it no matter what the market brings you.
Unfortunately, not all traders know the right way to calculate their position size. Calculating the position size helps in defining the risk-per-trade of a trader. Position sizes serve a very important aspect in Forex money management.
When you trade on leverage, you can gain more profits but you can also gain losses more than the amount that you deposited on your account. For this reason, leverage is referred to as a double-bladed sword. It allows you to gain profits and at the same time capable of wiping out your trading account. Make sure to use forex trading tools from MyFXBook when using leverage.