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Description
Forex Trading Report-28
Forex Money Management
A trader's money management style can be the
difference between a loss and a gain. While it is often viewed as unpleasant
and even as a burden, this aspect is crucial to Forex trading success over
the long term.
Forex money management forces a consistent monitoring of a trader's position
and to accept the losses when necessary. Most people do not care for this
aspect of trading, but it is very important.
In many cases of large losses, poor money management was the culprit.
Everyone wants the $1 billion profit in a single day, but that is a market
rarity. Good Forex money management, though, can give a trader much better
odds of a large gain than a trader who has little or no money management.
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a very successful day trader and trend
follower, advises beginner traders to risk only 1% of their total equity on
any trade. At 1%, a loss is very minimal and it is much easier to recoup and
rebound.
On an individual trade, the 1% makes little difference and even if the
trader is wrong 20 times, he or she will still maintain 80% in equity. This
type of Forex money management, however, requires discipline which is often
in short supply with many traders.
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