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10 Forex Money Management Tips

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A trading plan will tell you when to enter when to exit, which currency pair to trade, how to manage your money. Below is a list of money management tips to use during Forex trading. – PowerPoint PPT presentation

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Title: 10 Forex Money Management Tips


1
10 Tips for Forex Money Management
2
Index
  1. Forex Money Management
  2. Quantify Your Risk Capital
  3. Avoid Trading Too Aggressively
  4. Be Realistic
  5. Admit When You Are Wrong
  6. Prepare for the Worst
  7. Visualize Exit Points Before Entering a Position
  8. Use Some Form of Stop
  9. Don't Trade on Tilt
  10. Respect Understand Leverage
  11. Think Long Term

3
Forex Money Management
  • To succeed at trading, you need a complete
    trading plan.
  • A trading plan will tell you when to enter when
    to exit, which currency pair to trade, how to
    manage your money.
  • So money management is vitally important, but it
    is only part of the complete picture.
  • Below is a list of money management tips to use
    while Forex trading.

4
(No Transcript)
5
1. Quantify Your Risk Capital
  • Many important aspects of money management
    proceed from this key value.
  • For example, the size of the overall risk capital
    will be a factor determining the upper limit of
    position size.
  • You might consider it prudent to risk no more
    than 2 of the overall risk capital in any one
    trade.

6
2. Avoid Trading Too Aggressively
  • Trading too aggressively is maybe the biggest
    mistake new traders make.
  • If the small sequence of losses would be enough
    to eradicate most of the risk capital, it
    suggests each trade has too much risk.

7
  • A way to aim for a correct level of risk is to
    adjust the position size to reflect the
    volatility of pair you are trading.
  • But remember that a more volatile currency
    demands a smaller position than the less volatile
    pair.

8
3. Be Realistic
  • One of the reasons that Beginners are overly
    aggressive is because their expectations are not
    realistic.
  • They think that aggressive trading helps them to
    make a return on their investment more quickly.

9
  • However, the best traders make steady returns.
  • Setting realistic goals and maintain a
    conservative approach is the right way to start
    the trading.

10
4. Admit When You Are Wrong
  • The golden rule of trading is to run profits and
    cut your losses.
  • It is essential to exit quickly when there's
    clear evidence that you have made a poor trade.
  • It's a natural human tendency to try and turn a
    bad situation around, but it is a mistake in
    Forex trading.

11
5. Prepare for the Worst
  • We can't know the future of a market, but we have
    a lot of evidence of the past.
  • What has happened before may not be repeated, but
    it does show what the possible is.
  • Therefore, it is essential to look at the history
    of the currency pair you are trading.

12
  • Think about what thing you would need to take to
    protect yourself if a bad scenario were to occur
    again.
  • Do not underestimate the chances of price shocks
    happening you should have a plan for such a
    scenario.

13
6. Visualize Exit Points Before Entering a
Position
  • Think about what levels you are aiming for on the
    upside and what loss is sensible to the withstand
    on the downside.
  • Doing so help you to maintain your discipline in
    the heat of the trade.
  • It will also encourage you to think regarding
    risk versus reward.

14
7. Use Some Form of Stop
  • Stops help to cut losses and are very useful when
    you are not able to control the market.
  • At the very least, you should use a mental stop
    if you don't want to use a real order in the
    market.
  • Price alerts are also very useful.

15
8. Don't Trade on Tilt
  • You may suffer a bad loss or burn through the
    substantial portion of your risk capital.
  • There is a temptation after the big loss to try
    and get your investment back with the next trade.
  • But here's a problem. Increasing your risk when
    the risk capital has been stressed, is the worst
    time to do it.

16
  • Instead, consider decreasing your trading size in
    a losing streak or taking a break until you can
    identify the high-probability trade.
  • Always stay on an even keel, both emotionally and
    regarding the position sizes.

17
9. Respect Understand Leverage
  • Leverage offers the opportunity to magnify
    profits made from risk capital you have
    available, but it also increases the potential
    for risk.
  • It is a useful tool, but it is very important to
    understand the size of overall exposure.

18
10. Think Long Term
  • It stands to reason that the success or failure
    of the trading system will be determined by its
    performance in the long term.
  • So be careful of apportioning too much importance
    to the success or failure of a current trade.
  • Do not bend or ignore the rules of the system to
    make your current trade work.

19
Thank You
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