Newbies looks on the money management in a confused manner when it’s been discussed. The truth is that every trader must pass this stage in forex business. Sometimes you wonder why money management is been talked about in forex business. It’s not bad you wonder about this in fact you have every right to wonder why many experienced trader will tell you about money management.
The truth about surviving in forex is that you must learn to manage what you have to get what you don’t have. The funny aspect is that we practice money management in our daily life even without noticing and yet we keep wondering what is money management. .
Right now let’s discuss some fact.
If you walk into a restaurant that sells a plate of food for $10 while you have $10 at hand, what will you do? Simple you get to introduce money management. It will be foolish to spend your whole $10 on food and come back empty handed with no hope of eating another meal. (I would also want you to think about forex with this illustration). your best bet is to look out for necessary things in that food. You might want to skip meat, that juice that comes with it and go on the real food that will give your belly a full load. By the time you skip this you might eat a $5 dollar food, get belly filled while avoiding the pleasure of the food and still save up another $5. By doing this you have practice money management.
So in forex if you have the opportunity to make $100 with your $100 capital at once, you know it will be very risky and the best bet you could do is to risk 5 percent of that amount to target some profits. With this you can stay longer in the market and have more chances of making more trades which will give you a good percentage profit at the end of each month.
SO WHAT’S MONEY MANAGEMENT?.
In my own definition I summarize money management as the ability to risk too little and target a bigger profitability at the right time with the right strategy.
It’s just simple as that. You don’t need to risk huge to make huge profits but know you can still make good profits even by risking little and becoming patient enough.
TIPS IN SUCCEEDING WITH MONEY MANAGEMENT.
* Risk little and target bigger
* be patient
* know your goals
* have a trading plan / strategy
* practice
* avoid greed and unnecessary emotions.
* don’t look at your daily profit but focus on your monthly success.
MONEY MANAGEMENT HARD FOR NEWBIES?
A newbie asked me this question and I started laughing, she was gazing in amazement. While I was laughing was that she recently blew her account and she was now asking me about money management. Forex is risky and if you don’t learn by words, you just learn by experience. The truth is that newbies might find it difficult keeping with money management at first but as time goes on they will understand better that greed is a curse and would open their mind to embrace money management. We admire professional traders but it’s their ability to minimize their risk have given them the ability to survive and make monthly income here.
FOR NEWBIES IT’S NOT TOO LATE.
As a newbie I know you just have blew up your first trading amount and you feel discouraged but cheer up. All professional traders you see today passed through this stage before they understand that money management is the key to success. Every trader have their own own weakness but it takes discipline for us to focus on our pattern and look out to be profitable at the end. There is hope and the demo is right there for you to build a good strategy and a great money management pattern that will help you succeed. Think about this (winners don’t quit).
MONEY MANAGEMENT MATHS IN THEORY.
Let your total risk be the times 2 or 3 of your take profits.
Let’s assume you see a set up pin bar and you are hoping it will move bullish.. Calculate your stop loss and target your take profit level of your risk by more. Am sure with this we can survive more longer in this market even when we make few successes we can still become profitable.
LAST WORD
I just want to specially thank you for taking some of your time to read about my money management topic. It takes practice to start making it a reality and am sure you will make it if you are determined. This business comes with risk and it will be thoughtful you work hard to minimize this risk and increase your chances of making more profits.
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