Forex Money Management
Forex Money Management – manage your money properly when trading on the forex market.
The importance of money management.
Money Management is the most important point that can be used between forex traders. The purpose of investment / business is not to trade that only relies on chancy or blind speculation. Do not believe This can be proven by research. If there are 100 traders who start trading with the same trading system. Then they can only produce 51% of the profit ratio. Then the traders will be able to have a doubling of funds at the end of the portfolio time period.
Apart from a trading system that can only generate 51% profit, about half of traders lose their money because of careless money management plans. Most traders don’t know how important money management is.
Understanding Money Management in forex trading.
In some terms used, “Money Management” can also be interpreted as a plan to manage funds so as to minimize the risks that exist without having to reduce the potential profit.
It is very important to understand the concept of financial management in depth before making a decision in finding the right entry point. Managing money in the right way can make you have invaluable income. Like someone who manages everything CEO in a big company.
Professional forex traders
There are so many money management strategies out there, professional forex traders will manage money in various ways. Professional forex traders will maintain a balance between losses so as not to overdo it. It can also be a psychological condition such as too much euphoria when you get profit or too bad when you lose.
Money management strategies in Forex Trading.
First of all, you must know and target what time period to order a trading account. Can be once a month, every 6 months or once a year. When you trade forex, and prepare to open a position, make sure you calculate and manage your money management strategy correctly.
For example, if you have a balance of $ 1,000 and you open a position by setting a total loss of $ 100, then you use capital as much as 10% of the balance. That is too risky, Imagine when your first position loses, then the rest is only $ 900.
Then you open the position again with the same value hoping to get even. But your second trading experience also suffered losses. Balance is $ 800. Imagine if you trade 5 times and you lose. Your capital is only $ 500, and to return the capital to $ 1000 again will require a hard struggle and that is too risky.
Manage profits and losses.
Well, what if we count the total loss of only 3%? . It must be very safe than the first money management strategy right?
If you are a beginner forex trader, it never hurts to try money management strategies like this. Example You have $ 1000 as the starting balance. Then in the first position you enter by using a loss ratio of only 3%. Until the third position you enter a loss of three losses.
So the rest of your balance is only $ 910. Well, you can increase your risk ratio to 5%. When you trade and then you can profit BEP (return on investment) even you have gotten a profit. In addition, you are a trader who uses cash back services in the form of rebates in each position, you will certainly get more benefits.
When you make a profit, return to the risk ratio of only 3%. When 3 consecutive times you receive a loss, it increases it to a 5% risk ratio, and so on.
The conclusion of the second plan is that money management strategies are very comfortable to implement compared to the first strategy. On the other hand, we can maintain balance in balance. On the other hand we can also maintain the trade in our psychology. So we don’t overdo it when we find results whether it is profit or loss.
You don’t need to look for a forex strategy that can give a 100% profit signal. Strategies with a profit ratio of more than 55% are very beneficial if you are also good at managing money management.