Money management is one of the most important concepts for traders of any experience level to practice, and understand. Money management can turn a poor trader into a successful one. Too many traders, especially in certain markets, can be extremely irresponsible, and it's up to you as the owner of your money to get it right. The key is to remove emotion from your trading. It allows you to become picky about the forex trades you make.
Traders never get this right and end up making more deposits than withdrawals from their broker. ?This makes the "broker" rich and the "trader" poor. ?Someone is on the other side of those trades laughing all the way to the bank. ?Laughter is good, we recommend a LOT of it. ? And because the forex market is so huge there will always be the lure of quick and easy riches.
Dont allow yourself to get caught up in this mindset. Ive seen many a fortune lost in the forex market because people thought it was easy money.
All too often traders chase a loss with another horrible trade. So why not just sit back and wait for a good trade?
Excellent question, and it's one that you should be asking yourself everytime to call your broker. In the forex markets you are dealing in most cases with a good amount of leverage, which when it turns against you can ruin even a large bankroll. So not only is it important to practice strict money management when investing in the foreign exchange markets, it's also advisable to utilize "stop-loss" on all your trades.
If you make a system, and stick to it, completely removing emotion from the equation, then your account will grow and you will start to believe in your system. ?Set limits, track everything, gain confidence. ?The most we ever risk 2% of our bankroll on any given trade. ?This means that if you have an account size of $1000 that you will be risking no more than $20 per trade. Some of you might think this is ridiculous, especially in a market that has the trading volume of the foreign currency exchange, but I assure you the guys making all the money in forex are playing it safe for the most part. Occasionally you will see and hear of huge trades hitting the new wire, but many of those publications are simply advertising for the brokers, and they wont disclose that the guy who was able to pull that big sum out of the market was working with a huge bankroll.
Real success takes discipline. ?If you want to succeed at trading forex long-term you are going to have to be very disciplined in your trades and your money management. ?Sure there are some huge fortunes made in the forex world. ?That lure will always be alive and well. ?But the guys who make a real living at it practice strict money management and never put anything at risk than they can't?afford to lose. ?Put it this way, if losing $20 hurts you, then you need to be paper trading or subscribing to a mentorship program or signal service that you trust. ?
Start small and build up. ?If you start with $100, increase your trades once you hit $1,000, and then $10,000 and so on. ?Before you know it you will have a real bankroll that will be the envy of all your friends. ?
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Author Resource:
If you need help making the most of your forex trading we can help, We love the forex markets and even run a successful forex signal service to help customers.
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