Forex Trading With Money Management

If you are reading this article then you are are probably looking for more information regarding Trading with money management. It is true that one of the real keys to success when it comes To Forex trading is a good money management strategy.

When you are trading with money management then you will be able to protect your capital and Make sure that you keep your profits as high as possible and limit your losses. In principle this Sounds quite easy, however there are far too many people who break these simple rules.

I will firstly discuss what your money management strategy should not look like. One of these Examples is a strategy which is called the “martingale” strategy which involves increasing your Trade size after every loss. However it is important to point out that this is actually the opposite Of what good money management strategy does.

This strategy was initially developed for the game of roulette, however many people try to Implement this strategy when it comes to trading. The logic behind it is that if you lose a trade Then you need to win that amount back and make a small profit in the next trade. However this Strategy can result in you going broke due to the size of the loss or through not being able to Increase the size of your trade anymore because of a lack of available leverage.

One of the best money management strategies is to simply set a risk percent per trade and Then adjust the size of your lot after each trade. However the important question is how much Should you risk per trade? You should choose a level of drawdown that you never want to Surpass then you will need to observe the results of your system from the previous 12 months. Your risk percent setting should generate a maximum drawdown of half of that value on the Backtest.

If you ever reach the point where you get to the maximum drawdown you set you should stop Trading with the system and use paper trading in order to observe whether it picks up again. If The drawdown actually reaches double the size than ever before this means that it is likely that Your system is not working correctly or the backtest is not reliable. 

You should also always look at the factors surrounding Forex trading. If you rely on leveraging Then it is important that you are aware that the volatility of the currencies can be significantly Pronounced so it is important that you always keep your account under review in order to Monitor your investment and ensure that it is not in danger. 

An important aspect of trading with money management is that you always keep accurate Records of your losses as this will also help you to determine the direction of your investment. Money management is a vital part of Forex trading regardless of how much money you are Investing. It is also recommended that you spready your money across the board instead of Having growth spurts at one point.