If you can manage your money effectively, your possibility of winning becomes certain. Without this, all the technical knowledge and research can go in vain. The most crucial part of Forex is managing money. It is not so simple. It’s not just about eToro’s spreads, XTB’s commissions or the swaps you need to pay with your broker. Utilizing, savings, spending, and budget processing are the example of money management. It is about how much we invest, when to buy or when to sell. The total distribution and utilization are called money management. You have understood so far that this term is so effective on Forex trading. Let’s discuss it further.
After joining FX, you will enter into many risky situations. It would be best if you solved these like a professional. Since your profit is related to your probability, I suggest you lessen the risk level and control the figure. Some other measures:
- Identify risk
- Evaluate and explore those threats
- Establish solutions
- Apply and control your possibility
- Position sizing
Invest with the losing ability
The number of your investments should be as much as you can afford to lose. It’s not a magic show that you are allowed to test your luck. The entry into this field should be applicable for competent and educated people. Read more about the importance of trading education at Saxo and this will help you to endure the losing trades more effectively. The more you learn about the market, the better you become at managing the risk.
Set your stop-loss according to the standard protocol. Do not be greedy or fearful. Forex is such a place where calculation and analysis matter. This is not a place for cowards. Keeping a fixed risk-reward ratio at different levels is a famous secret of productive trading. The standard figure of risk-reward ratio is 1:2
Start from a small margin.
If you have 10000$ in your account, start by investing 1000$. You can use leverage here at 1:100. Then your unit size will be 100,000$, which is quite a perfect figure. Apply your trading psychology and strategy and hope for the best. And make sure you follow the basic guidelines in trading profession.
Avoid higher probability
Temptation can easily cross your mind, but your ability should be strong to stop it. Do not involve in a higher danger game. It can blow up your account and finish your business. Be sensible at the time of taking chances. Calculate your current account balance and think of how much you can take a risk.
Maintain the average transactions
If a market crosses a bad condition, do not just minimize your investment and escape from fear. In the same way, when the market is in excellent condition, avoid the higher investments. It can deceive you next time. Do not just believe in miracles. This is FX (the largest and complicated market in the world). Maintain your average ratio so that your business goes at a stable speed.
Accompany with your Types/Strategy
If you are a day trader, stick to your plan. If you used to swing trading, keep going with that. Just because you faced a loss, do not switch your types. That can be more dangerous for you. Not every strategy works for everyone. It would be best if you believe in yourself and focusing on your game plan. Once you identify your category, stick to it until it exists.
Stay away from revenge trading
There is a scientific theory that if you trap yourself in ego, your life will become hell. Ego comes from anger. And anger comes from failure. But those who control their anger and ego will be able to enjoy success. Keep yourself a hundred miles away from revenge trading or over-trading. It doesn’t matter either you earn profit or loss. It would help if you traded with stability and efficiency.
Though these three words ‘money management ability’ sounds straightforward, it is more complicated. If you are very skilled at technical terms and have little knowledge of money management, it will be hard for you to win. If you are prominent with this ability and have fewer technical ideas, it may bother you, but you can expect a win.