Money Management

Money Management

Money Management is a subject that most traders pay little attention to the other side have large losses, which are far from the profits that can be done. This is a crucial part of marketing and if you want to be a trader than you need to spend good time on this topic. First, retailers will put uneven amounts of money in each trade, which can result in big losers and winners smaller. As a trader you should use stops while trading, there are different types of stops, which will see them in your trading account, one of them is called a Trailing Stop. A trailing stop in the Forex market are different from those of the stock market. When you set your trailing stop to tell the dealer how many pips, the market should move before moving your regular stop order, it does not always track. The number of units may trade based on two components, the first one percent of the capital, and the second the dollar amount of risk per unit (examples below).

Example:
The calculation is:% of equity divided by dollar amount per unit of risk as using $ 25,000 total trading capital
5% of $ 25,000 = $ 1250
Buy EUR / USD, with a 25 pip stop order = $ 250 risk per unit
$ 1,250 / $ 250 = 5 units can be bought EUR / USD

Another key point is always round down your risk, whether in the example above you can spend $ 1,275.00 for trade, it does not mean to put the 6 units instead of 5 units. Most traders use the famous 1-5% rules when it comes to the amount of capital at risk for certain operations. As a new trader should be looking at using a 1:02 risk reward ratio, which means that you're willing to lose one dollar for every 2 dollars at stake, this will give you the opportunity to be in the order of crafts and live to trade another day. Stay in the game until you have to understand, will be in order of trades, regardless of which system to use ... systems for performance and fail depending on market conditions.