Managing your money in Forex trading

[wahelmh11]

Managing your money in Forex trading

Money management is a key element in the overall profitability of traders. The desire to take a profit as soon as you see it can lead to the loss of a lot of money. This may be due to the fact that traders often tend to place stop-loss orders​​ until they are filled, but do not do the same when taking a profit. If you operate on a 50/50 basis that you make a profit on 50% of the trades made, then you are unlikely to make a total profit.

Before making a trade, think about how much money you are willing to lose. If it's £100 then you should aim to make at least £300 profit. That way, based on a 50/50 success rate, you'll make a total profit. For each element of risk, you should aim to earn at least double the profit. Discipline is critical when things are going well as well as when they are going badly.

Another common mistake is setting unrealistic stop loss and profit levels in inappropriate markets. A stop-loss of 100 pips for EUR/USD, for example, is quite realistic, but may not be very suitable for stocks. Use price ranges over the past few days and months as a benchmark when setting stop-loss levels.