Forex money management strategy

Forex money management strategy

This section is one of the main sections you'll ever read about the trade.

This is perhaps the most unorthodox of all money management strategies, but it can be an effective method in FX, Why is it so important? Well, we are busy making money and we are anxious to learn how to manage money. Ironically, this is one of the most overlooked areas in retailing. Many traders are only concerned with how much you can tolerate losing, and click the Trade button. There is a term for such investors, they are called Gambler.

Forex Money Management | Written by Thomas Long One of the oldest and most powerful money management strategies used to enter into and exit out of trades If you trade without money management rules, you are indeed lucky players. You do not have a look at the long-term return on your investment. If you do not believe us, consider this example:

Many people take a year, year to win out to Las Vegas for the grand prize. And some of you are winning. And how come it is possible that it still has casinos? Casinos make money on those who lose more precisely. This comes the saying the house always wins.

The truth is, calculate the long run casinos and the statisticians are better than Joe Bloggs.

Forex money management techniques are such type of techniques, which are actually used to guard for protecting income as well as reducing the risk . Another aspect is that it can be very easy to lose money and can earn very difficult. Imagine, you have 100,000 € seed money and you lose 50%. Now you only have 50,000 euros of capital. The next trade, you win again 50%, but they have still only 75,000 euros. It rings?

This aspect can be particularly at scalpers beat book. A system that 70% profit trades with "spit" can ever produce another series of losing trades.

These are the reasons why you sollren risk as a trader but a small part of your capital to survive these hard times. Remember that if you praktitierst strict money management you will be at the end of the casino profits and always will.

Money management is a topic that has been written about all the books and as extensive as Forex itself, the term is also known under the term betting strategy in games such as blackjack and poker. At the end of the article I'll present a simple but yet effective money management strategy.

In my opinion, a forex trader should still deal with this issue before he makes a single trade. Why? This has mainly two reasons. Can disregard of the rules is the account look away faster than you and secondly you get used to bad habits when it trades at too much risk. Does it even still, one is convinced that high-risk work and this increases even more, leading eventually to large losses.

Money management can be translated to risk control. The first goal of effective risk control is to limit losses. It works primarily by the fact that only a certain percentage per trade in the account is risked, and ALWAYS will put a stop loss. A stop loss is an instrument that allows the broker's position close automatically when it runs x pips View definition in a new window or x percent against the trader.

As you can see in the graphic, it makes a significant difference whether you risk per trade 2 or 10 percent. At 10 percent risk after 19 trades 85 percent of capital have disappeared. In turn, this means that one has to fold its assets versieben need to get back as much as in the beginning have. Bad trade, right?

A simple yet effective money management system is always risk per trade to 2 percent of his account balance (account balance). This system was also used on the left side of the graph. The account grows, so grows the profit per trade automatically. In return, losses are limited by reducing its stake per trade after every loss.

Finally, a small account for motivation, if they appear less 2 percent.

Yield = [(1.02 ^ 50) -1] x 100 = 169, 15%

This is the return that is created when the account is growing every week by 2 percent. So it takes at best only a profitable trade per week.