Most traders think forex money management is just placing a stop and it’s much more than that. Good money management can turn a losing system into a winner and mediocre system into one that makes triple digit gains.

If you want to win long term at forex trading, you need to defend what you have and keep losses small. As the old saying goes – to win you need to bet and you can’t bet if you’re not at the table! Obvious but true.
<br />Most traders pay very little attention to money management – but it’s the cornerstone of your forex trading strategy’s success, so let’s look at some tips you can incorporate in your forex trading strategy and become a winner.

Leverage

The first point to keep in mind is don’t use all the leverage your broker gives you.

They will in many instances give you up to 400:1 and it’s tempting to use it all however, if you do you will blow your account out the water.

A good leverage is maybe 10 – 20:1.

Trading Frequency

Cut your trading frequency back.

Most novice traders simply trade too much and take low odds trades. The good opportunities don’t come around often and you need to be patient and wait for them.

I know traders who trade less than 20 times a year and make triple digit annual gains so – trade only when high odds trades present themselves.

Deciding Bet Size

How much should you risk on one trade?

Common wisdom often says 2% but for a small account this risk is so small it means 20 on 1,000 account. Well you won’t make much money doing that! Risk 10 – 20% of your account equity on any single trade.

Forex trading is all about taking calculated risks at the right time and making meaningful bets – if you don’t like risk don’t trade forex.

Diversification

If you have a small account and a good trade and you think can make big profits, don’t dilute its potential. Diversification is not guaranteed to reduce risk and in most instances dilutes gains.

Always Assume the Worst

Many traders think their risk reward is their stop minus their profit objective – but that’s a trader’s opinion nothing more. When entering a trade always assume the worst eventuality and from there, things can only get better!

The Biggest Mistake of Novice Traders!

In money management placing a stop is normally easy, where most traders go wrong is the way they trail it.

Most traders get so excited when they get a profit, they don’t want to let it get away and they immediately move their stop up to close and get stopped out on a normal counter trend swing. The market then immediately goes back the way they thought and makes thousands and their not in!

To make the really big profits, you must accept drawdown in the short term in your open equity, to bank the big profits. Look at any forex chart and you will see that the big trends last weeks, months or in some instances years and you need to hold them as long as possible.

A good way to do this is a key moving average and we like the 40 day MA, then look for trend line support or resistance just below it. It’s far enough back to keep you in the trend but close enough to protect you.

Forex money management is all about taking calculated risks at the right time.

It’s a fact that most traders try so hard to avoid risk, they take too little which guarantees they lose. The above money management tips if used correctly will balance the risk reward just right and lead you to triple digit gains.

Watch the video related to forex money

The New York session started in a tight range on the 15 minute chart. However, price was bouncing off of the 200 EMA on the hourly chart. It was also being supported by the Support Pivot Point (S1). All we needed was a clear break to the upside for a target of the Resistance Pivot Point (R1). With a breakout strategy such as this, its a good idea to use Fibs and Pivots, as they are your leading indicators. Live FOREX Training | Everyday! www.fxbootcamp.com

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Forex money management is the key to making bigger profits yet most traders have no idea how to do it correctly and more traders lose due to poor money management than any other reason. Here we will look at how to do it properly…

Utilize these points as the basis of your money management and you will have better risk to reward and better profits.

1. Risk Meaningful Amounts

Many traders want to take so little risk in forex trading they put their stops so close their bound to get stopped out by normal volatility. Understand this – forex trading is risky, you have to take risks and a stop to close, simply guarantees a wipe out.

This is why day traders and scalpers always lose, because their stop is in the way of random volatility.

There is of course a balance but most traders have their stop to close and you need to take a bigger risk when market conditions dictate which we will come back to in a moment.

2. Do Not Over Leverage

If you are going to take more risk per trade, then you need to de leverage.

Forget about 200 – 400:1 that most brokers offer you, this is madness for small accounts under $1,000, use 10:1 and build up as your account grows.

Over leverage simply means account wipe out.

3. Remember the 80 – 20 Rule

The 80 – 20 rule is used a lot in business and postulates that 80% of your profits come from 20% of your clients.

This rule can be applied in many areas of life and in forex trading its very applicable and means – cut you’re trading frequency back!

Many traders think the more they trade, the more they will make but the reverse is true. All they do is end up taking trades that are not good risk rewards and lose.

Wait for the really highs odds trades and hit them. I know traders who trade around a dozen times a year yet, make triple digit gains.

Trading less can mean making more for most traders so cut back and only hit high odds trades.

4. Risk More Per Trade

If you are trading high odds set ups then you can risk more on them and make the gain worthwhile. Many so called experts tell you should risk only 2% per trade but consider on a small 1,000 account that’s $20.00 – well if you risk that your stop is so close normal volatility will get you. Look to risk 10% or even 20, on the high odds trades and have the courage of your conviction.

5. Don’t Diversify

This is ok if you’re trading a large account of $50 – 100k – but for small potato investors to diversify for the sake of it, doesn’t reduce risk at all but simply dilutes profits.

Focus on one trade only and don’t dilute its potential.

6. Take Profits Early or Partial Profits

On surges in price from fair value in many instances it’s a good idea to bank a profit as a currency becomes over bought or oversold and then wait for the next re entry – the problem with this is if it’s a big trending move you can end up out the market and watching the trade pile up bigger profits and your not in on the action.

There is a simple way around this bank 50% on the surge and then look to put it back in on a retracement back against you. If the moves carry’s on your still in.

I have found the above smoothes the equity curve and it helps traders remain focused and disciplined.

When you trade a forex position you are immediately at risk and how you control the risk, will determine how good your profits are going to be.

The above tips are designed to hit high odds trades then, take calculated risks when the time is right and at the same time protect your core equity.

Money management should be a key area of your forex education, so learn how to do it correctly and you could soon be on the road to forex trading success and triple digit gains.

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Watch me day trading forex live with my 3SMA forex trading system! Visit my website at www.hectortrader.com

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If you want to win at forex trading, you need to like the good football teams – play strong defence first. If you do, the offence will take care of itself and you could soon be making some huge gains and protecting what you have at all times.

Many traders do forex money management as an after thought and think it takes care of itself – but with the leverage available, this is a sure fire way to wipe out your equity.

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Forex money management is all about taking calculated risk at the right time and as the old gambling saying goes:

“To win you need to bet but you can’t bet if you’re not at the table”

As soon as you open a forex trading position, you are at risk.

How you manage this risk, will determine how successful you are and how much money you make.

Here are some tips on money management which will help you maximize gains and limit risk.

1. Trade only when the odds are in your favour

Many traders think the more they trade, the more they will make – but this is simply not true. High odds set ups don’t come everyday and you shouldn’t ever force the market to try and give you profits.

2. Remember the 80 – 20 Rule!

This applies in many areas of life and simply says 80% of your gains, come from 20% of your efforts. Look at your trading in this way and you will often see, you are trading for marginal profits.

Adjust your forex trading strategy to trade less and make more.

3. Placing Stops

These should be placed as soon as you enter a position.

Never run a mental stop chances are if you miss it – you will wait to see the market it turn around as most times it won’t; leaving you with a big hole in your account.

Always place your stops behind support and resistance and not in “no mans land”- have the view if I get taken out so to will a lot of others.

Now lets look at the real problem most forex trader’s face – trailing stops.

Most traders try so hard to restrict risk they actually create it, by moving their stop to quickly and getting caught by volatility. They get stopped out with a marginal profit, then see the trade go back in the direction they thought piling up big gains and there not in!

Forex trading is risky – don’t let anyone tell you otherwise.

You need to risk money to make it, this isn’t being rash this is just a fact of life.

Volatility is the enemy and to execute your trading signals for maximum profit, you need to take it into account.

If you want to learn currency trading the correct way, understand the concept of standard deviation of price.

Don’t know what it is?

Then make it an essential part of your forex education!

When trailing stops always leave the market room to breathe.

For example, if you are following a big forex trend, you can leave your stop behind a key moving average (the 40 day is good) and while you will miss the last bit of profit, that’s ok – if you got just 50% of every major trend, you would be very rich.

We quoted an old gambling saying earlier that applies to forex trading and here is another.

” There’s a time to hold them, a time to fold them and time to get out of town fast”

If you have understood this article, you will understand that proper forex money management is essential and “getting out of town fast” will save and preserve your equity.

Watch the video related to forex money

Not much happened during the European session today and there is nothing on the calendar for the US Session. Doesn’t seem like much of a trading day eh? Well Fibs, Pivots and Moving Averages all point up for the EUR/USD. So the only question is where the entry/exits points should be for a short USD trade. LIVE FOREX TRAINING | EVERYDAY! WWW.FXBOOTCAMP.COM

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