“Managing money and knowing that what you want to achieve with your investments, is more significant than actually investing it. As money is all about how you earn, invest, and then keep it.”
Forex Trading is not an easy task especially for beginners who hardly knows the difficulties of this market. Money management is the most imperative phase if you are looking to make sound profits.
Without proper money management tips and tricks, it will have seemed like you are skydiving without a parachute or in dire straits. To become a successful trader in the Forex market, it is vital to work on the most crucial aspect of money management.
“Properly managing money is the single biggest variance concerning financial success and failure.”
Here are some tips and tricks on how you can manage your money and avoid heavy risks and losses. These tips will help you to grow your account and trading expedition.
Analyzing the risk per trade
As this trick is clear by its name, analyzing, and then evaluating the risk of your trades is the most significant factor in managing the money successfully. It has been stated after the study of different practices and procedures of money management that the higher boundary of your risk per trade should be equal to or less than 2%.
By knowing your maximum percentage of risk, you can compute your risk as per your trades.
Evaluate the reward and risk ratios of your trades
Yet another trick to manage your money and minimize your loss is evaluating the ratio, as this will help to close the trade after getting the maximum profits. The ratio of 1:1 indicates the number of risks and the number of gains are the same. This ratio may indicate a sense of breakeven while on the other hand ratio with 2:1 and 3:1 depicts that the gains are twofold or threefold in respective to the risks.
Maintain journals for your trading
To highlight the weak phases of your money management, keeping and maintaining a journal for your trade is crucial. Examine your trade journal on a weekly or monthly basis, as this will assist you to categorize your losing patterns of money. This will be the performance management of your trading activity. Thus maintaining a journal of all your entries will help you to keep your activities on a proper track, moving smoothly and averting the same blunders again in future trading.
Avoid Emotions and Greed in trade
“Greed is a hell and a stout devil which drains the person in a never-ending struggle to fulfill the necessities without ever reaching contentment, whatsoever you feed it will never be sufficient.”
The major collapse of any Forex Trader is greed as it leads to dangerous trading mistakes.
Besides, many new traders let their emotions manage their trades. Now there will be a question in your mind that how the new traders let their emotions manage their trade? Therefore, the answer to this question is quite simple. The new traders use too many leverages or exit the trade at the initial stages before it generates the profits. While on the other hand, greed factors such as overtrading lead the traders into heavy losses. This can simply be avoided by making and executing strict trading plans.
“Don’t be a slave of your emotions, control them or they will control you.”
Cleverly using the leverages
Forex agents provide an incredible variety of leverages that can be used in trading, most of the traders are fascinated by Forex trading because of those leverages.
This fact is considered that leverages are essential to be used in trading because of the involvement of two different currencies but the traders must know this fact as well that the higher the leverage the higher the loss will be. Therefore, it is a last but not least trick and trip to manage the money by using the leverages in a trade cleverly.
“Money management and planning is strategic to financial liberty.”