Money management in Forex

The Internet trading gives great opportunities to earn money, but also it is a commonplace that lots of inexperienced traders lost their money during first trades. How to manage your money and control your risks? This question is one of the most popular among subjects for discussion on traders’ forums. Moreover, money management is important for advanced traders either.

Usually traders find trading systems that can bring them profit, but the lack of money management and trading discipline crashes all their plans. This is doubly disappointing, because money management is extremely easy to follow.

There are some simple rules that will save your money and make your trading more profitable and predictable. First one is an open secret. it says, “Never risk more than 2% of your money.” If you have $10000 you should open forex trading account with the initial deposit only with $200. If you risk with all of your money, the initial failure will deprive you of opportunity to trade Forex for long. This amount of money is enough to start trading and feel confident.

When you open your first real account, be careful with a leverage you have chosen. Many brokers offer a leverage up to 1:2000, but it is greatly risky. If you trade a big amount of money and the market goes against you, you will lose all your money really quickly. The best option is 1:200 leverage for both newbies and experienced traders. The problem can be that a broker limit the leverage depending on your deposit funds, so in this case pay more attention to choosing a broker.

The third important rule says, “Don’t risk more 2% of our deposit.” You should always calculate how much money you can afford investing into positions you open. The result of this calculation is a proper stop loss order. Also remember that most of trading platfroms is a free forex trading software.

Now you see that basic money management is not difficult at all. Just follow some simple rules and your money will be safe.