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Friday, June 16, 2017

Forex Money Management

Forex may open the possibility for you to have large income on monthly or even daily basis. But at the same time, it always has a risk that comes together with the potential income.

The risk is losing your money in a glimpse.

What makes most of the people failed in forex trading is because they are not prepared to face the reality that losing money in forex trading is just a part of the business. Nobody wants to lose their money but if you are not prepared for it then you might suffer even worse than you can possibly think of.

One important word that needs to be considered by every forex trader is “emotion control”. This is the hardest part to be managed by every human being. People tend to be greedy to get rich in a short period of time and sometimes they are just too afraid to enter the market when there is huge opportunity occurred and in the end of the day they just missed it.

Here are some of the tips that may come in handy when it comes to controlling your emotion in Forex Trading:

Control your Capital Risk

We suggest you to use only 2% of your total capital to enter the market. Some of you might think that 2% of your total capital might sound nothing or just too small. Well, in this business, patience is everything.

The idea is to have a long-term investment while at the same time saving your 100% capital. Getting your ROI may be varied in time for each different person. But once you got your ROI, it is time to withdraw the amount of your capital and invest it somewhere else than to keep it for as your capital. Because as long as the money is on the table then it is not yours.

       Have a Good Trading System and be Patience to Review it

Before jumping into the market, the best advice for all rookies would be to spend their time practicing their system using a Demo Account. Applying their method of trading that works the best for them and to review what are the advantage and disadvantage of their method.

Two professional traders might enter the market in opposite direction at the same time. Both of them have their own reason to enter the market and both of them might end up in a huge profit.

Vice versa, two rookies might enter the market in opposite direction at the same time. Both of them have their own reason (or not??) and both of them most probably end up in a huge loss.

So what’s the point of that illustration?

You need to really understand how does your trading system work for you. At what point you have to admit that you are wrong and what do you have to do to minimize your lost? And if you are right, what to do next?

            Be Fearful when Others are Greedy and be Greedy when Others are Fearful

That is the advice from one of the richest man in the world, Warren Buffet. When Forex Market becomes highly volatile, it is quite difficult to control the risk of losing your money. You may not have the chance to do anything because everything happens in milliseconds that your finger is not fast enough to catch it.

If you are a day trader or a short-term trader, the best advice would be to stay away from the market when it has too high volatility. And try to catch lots of opportunities when volatility decreases because it is the best moment to implement your technical analysis during this moment.