Forex Money Management

This is one of the most important aspects of forex trading
and that is the money management side of it. So make sure that you read this article several times and get your money management in order.

Forex money management is one of the most key affairs you can read before you actually begin taking live trades.

The money management rules discussed here will teach you how to avoid the costly mistakes many new traders make, frequently to the degree that they lose their entire investment on the first handful of trades.

Psychology is actually the most essential factor to money management in forex. You get to be able to separate yourself from any emotional attachment you may get to your money. This is not really easy to do, but it plays and it can be done.

If you allow yourself to become emotional on a trade, you will not exit the trade properly, and this could mean holding on to a trade when you should have let it go, or letting go before the trade had a opportunity to turn profitable.

First and foremost, you should take leverage and risk. It is advisable that you never risk more than two percent of your account balance on any trade. However, some go further and allow for as much as ten percent, but never more than that. This gives you the ability to withstand market fluctuations, and if the trade goes bad, you still have money to try again. You should never operate under the presumption that you will profit from every trade. You should also plan for losings. Therefore, most traders will tell you that the greatest thing to do is to keep your profits large and your losings small. Get your trading strategy around this idea.

Keep track of your gains and losses. Keeping accurate and detailed records of your account activity will allow you to see whether or not the strategy is working, or if it needs to be re-built.

Never go blindly into trading without a way to keep track of results. You will fall behind all of your funds and never understand why it occurred.

Finally, it is extremely advisable that you first practice a scheme on a demo account. Virtually all brokers offer a virtual account whereupon you make trades in real-time, but with imaginary money, so nothing is risked. This is the greatest way to test a strategy before you put your real money on the line.

However, be careful, once again, of the psychology of trading. When you play with fake money, nothing is risked. When real money is on the line, you must not get emotional. If you do, you will find yourself with very different results, most likely losses, than you had with the demo account.

Remember demo accounts are just that demo accounts and quiet often you are trading without thinking too much about it. After all if you lose it all it does not matter. So be careful and make sure you use all of your rules while using this demo account.