Forex trading is one of the riskiest professions in the world where the main thing you must focus on is to stay alive. Here staying alive means not losing your trading capital because gather trading capital is harder than learning to trade. As a result, once you lose your trading capital, t is almost near to impossible to gather investment for the second time. In this industry, if you can keep your trading balance safe, you can surely earn something from this market. For saving the trading capital, following pure money management rules is a must. A trader can be excellent in analyzing the market but without proper money management, he can still face losses.
Traders who have an 80% winning rate can still blow his account by losing just 20% of his trades. On the other hand, a trader with a 60% win rate can earn a lot of money just because of following proper money management rules. In the following article, we are going to give some tips about money management for Forex trading.
Use a valid stop-loss
When you are thinking about investing in Forex trading, the first thing you must do is to set a certain amount of your trading capital that you are ready to lose without any regret. Because Forex market is a place where you risk your money to earn money and you can’t avoid that rather than you can just reduce the risk exposer.
Once you have an amount that you are ready to lose, fix a lot size and the risk per trade based on the size of your investment. The forex market is so volatile that you can never able to measure actual outcomes. So if a trader has an open trade it will be really hard to close your position manually if the market gets more volatile. As a result, your winning trades can against you and you might lose more money than you are willing to lose. So to overcome this type of situation traders need to put a stop-loss order.
Stop-loss helps a trader to keep his account safe from losing more money than he can lose. Trade without a stop-loss order is like a car that does not have any break. So never a keep a trade opens without a stop loss because a stop-loss order reduces your risk exposer. But to ensure the stop loss is executed at the right price, you need to choose your broker wisely. Visit this page and learn more about the high-end brokers so that you don’t end up trading with the low-end brokers.
Trade with a solid risk-reward ratio
The risk-reward ratio helps a trader to stay in profit and also to keep his trading balance alive. The risk-reward ratio is the ratio between the amount of profit you want to earn and the amount you ready to lose to earn that profit. Traders should always use a positive risk-reward ratio no matter how good is their analyzing skill and it should the 1:1 or 1:2 or 1:3. We will suggest the traders use the 1:2 or 1:3 risk-reward ratio.
If they win a trade with a 1:2+ risk to reward ratio, they have already win the risking capital for the next 2 or 3 trades. As a result, if they lose the next 2 or 3 trades, it will not have a negative impact. In the Forex market, you will find trade in every minute and traders must avoid those trades.
Never show your anger to market
In Forex trading certain scenarios like losing few trades continuously may occur. But if you ever get angry and get biased to get that money back, you might end up losing more money. Whenever you get upset or angry with the market, you just need to take a break to clear your mind. You should not start trading until you have control over your emotions.