FOREX Money Management Tips

By: Timothy Rohrer
Submitted: 2007-01-17 16:15:09
Print this article | Tell a friend | For publisher | Social Bookmarking
Rating:
 

Whether you are a seasoned trader or new to FOREX, without a good money management it will be hard to ever make a dime. Good money management will be out a great trading system any day. Without knowing how to keep losses to a minimum will only jeopardize you’re trading efforts even if you have more winning trades than losing trades.

One of the worst mistakes traders make is trading without sufficient capital. This does not mean a trader has to have a lot of money to trade with, but enough to handle the movement in the market. The trader with limited capital will always be a worried trading looking to minimize losses beyond the point of realistic trading.

A good rule to follow is never risk more than 2% to 5% of your FOREX trading capital. Too many traders open mini accounts and begin trading heavily and end up margining out their accounts in a few months, if not a few weeks. Fore example, if a trader opened a mini account for $5,000, they should never trade more than $1 per pip. This way if a trade goes bad, the trader suffers a minimal loss.

Exercising discipline and following a specific trading plan is one of the most important aspects in FOREX trading. Discipline is also the ability to continue to trade your system even after you have suffered a loss. Emotional and revenge trading can easily wipe out entire accounts. Sometimes it’s good practice to ignore the dollar amount in a FOREX account and interpret the number of trades in pips only.

Think backwards when trading the FOREX market. Instead of trying to make money learn how to protect what you already have. If in the event that a trade does not develop in a reasonable amount of time or the market begins to form an opposite setup, you should employ the strategy of cutting your losses short to protect and preserve your capital.

Always use a stop-loss when trading. This will stop your position when the market moves too far against your position. Save your money to trade another day or on another trading setup. Too often traders are convinced of where they believe the market is going and lose their sense of reality and begin to trade on hope. They remove their stop-loss and hope the market will turn around, only to lose more money.

Trade light and never risk too much per trade. When in doubt of a trade, stay out of the market and wait for the trade to come to you. Use a system and follow the system without breaking the rules. Traders who are consistent and follow a definite plan are the ones that make money in the FOREX.

Tim Rohrer is an established writer and trader. To learn more about Forex trading, visit http://www.forex-investing.us

Article source: Expert Articles

Most Recent Articles in Currency Trading category

  • The Truth About Forex Trading Softwares and Expert Advisors - By: Richard Golman
    This article attempts to show readers many experiences of the author using various expert advisors and automated forex trading systems.This, primarily is to assist readers to make a better and informed decision as regard purchase of highly profitable automated forex trading software. This article will therefore be of immense benefit to aspiring forex traders wishing to take his trading to a new pedestal.
  • How to Pick Optimized Automated Forex Trading Robots and Systems For Maximum Profitability - By: Richard Golman
    This article tries to illuminate the features necessary to look out for before forex traders buy automated trading software. There are many scam forex products out there, but this does not for once suggest there are no profitable ones too. The big question is, how do traders recognize good expert advisors? This is what this article endeavor to address. Read on...
  • Profit in Forex and Make More Money Using Proven Automated Trading Software - By: Richard Golman
    This article attempts to expose the mistakes many traders of the forex market make, and why such mistakes are the culprits responsible for often less-than-glamorous performance of many of these traders. By following the invaluable suggestions articulated in the article, readers will learn the most pertinent lesson in forex trading, what you don't have shouldn't be an obstacle to what you want to have.
  • An Understanding Of Forex Charts Is Essential To The Successful Trader - By: Donald Saunders
    For an increasing number of Forex traders charts are an essential tool in reaching trading decisions and a knowledge of Forex charting and technical analysis is now a fundamental part of any currency trading course.
  • 5 Reasons For Entering The Exciting World Of Currency Trading - By: Donald Saunders
    Currency (Forex) trading is extremely popular with small private investors around the world and this is not surprising when you look at the advantages which this lucrative form of investment provides.
  • Currency Trading Without A Clear Strategy Is The Road To Financial Ruin - By: Donald Saunders
    Many novices are enticed into Forex trading by the promise of high and low risk or risk free returns for a minimal investment and rush head first into trading without any clear plan. As we show here however, currency trading without a clear strategy can be a fast route to financial ruin.
  • A Good Forex Trading Course Is A Must For All Beginners - By: Donald Saunders
    If you are tempted to participate in the world's largest and most liquid financial market and share in the profits which more and more small investors are enjoying today then do not make the mistake of doing so without at least some basic training.
  • The Best Hours To Trade Forex - By: Donald Saunders
    If you are new to the world of forex trading then one question which you will surely be asking, and which we answer here, is just when is the best time of day to trade?
  • Forex Trading Software Is The Foundation Of Successful Trading - By: Donald Saunders
    At the very heart of any forex trader's toolbox is a forex trading software package and understanding the power of this package and choosing the right package is critical to any trader's success.
  • Simulated Forex Trading Can Save You A Fortune - By: Donald Saunders
    There is no better way to learn forex trading than to actually be able to sit at your computer and practice trading in the live environment, but this can be a very costly exercise. Today, however, the advent of forex trading simulators makes this both simple and safe.