Though the risk is associated with any business, the phrase “financial volatility” seems to be more perfect for Forex trading. In spite of that successful traders are making thousands of dollars every day. There’s an old saying the more the risk, the more chance to make money from. This is certainly true for the currency trading market. Then what’s the secret behind to be millionaires? It’s all about money management and its associates. In simple terms, it refers to maintaining a disciplined plan to safeguard your fund and endless possibilities of profit.
Every successful trader has their own sets of money management strategies that protect their portfolios. Your regular well-defined trading plan might be brought you enormous profit but if one the market retrace to the posit direction and if you don’t have any money management policy, that’ll be enough to empty your account. So it should not be over-sighted. Read the below tips to help you make it easier to follow and develop your own money management tips.
Accepting the facts of losing
No matter how much experienced you are, you have to accept the facts that you can lose every bloody trade. And perhaps this is one of the most important acceptances that’ll separate your emotion from placing an order. There’s nothing like “perfect trade” in foreign currency business. Even if few orders hit the profit margin at a row, it can bounce back any time. If it back-fired, eventually it might strike your emotional trading. And there’s no chance of emotion in Forex trade– it can risk your account.
Quantify your risk capital
While every trading involves a certain risk, you have to quantify the probability of profit and the loss associated with it. If the chance of loss is higher than the profit, don’t place the order. The trading calculator is a nice tool to determine the risk. Professional trader prefers to limit risk within 2% of overall risk capital. It also determines the upper limit of position size of the trade.
Use stop loss and take profit
No matter what happens always measure where to stop– it can be in the form of taking profit or stopping further loss. Take profit ensures if market retrace, it won’t affect your profit and stop loss is the maximum ceiling amount you want to lose on a single trade. Though there are a few ways you can use these stop loss or take profit, make sure your trade’s boundary represent actual price-auction and market situation.
Placing a perfect stop-loss must near about the support and resistance where the price would get enough place to breathe. Take-profit also needs to be representing what is the amount of risk you are taking in that particular trade. It’s known as a reward-to-risk ratio.
Be a risk manager than a trader
While trading leads to enormous emotional outcomes, you need to learn controlling it. Before placing each order, consider and weighing all the options associated with cost and loss. Building the attitude will let you sleep soundly with the amount of money you have at risk. Don’t consider this market as an ATM or an unlimited supply of cash. To become a better risk manager and money will flow consequently.
In the End
Once you will incorporate these above tips and wisdom associated with fund management, you’ll be near to making a profit and ensure you don’t lose all your cash to trading on the next day.