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Posted on July 12, 2016 at 11:24 PM
It is very essential that you make use of money management techniques in your Forex trading activities. Money management helps you to avoid risking so much that you lose all your money and helps you to maximize your profits. Successful Forex traders are traders that are serious about their trading and would do well to integrate money management techniques to their trading plan to prevent uncertainties.
Tip #1: TRADE ONLY WITH YOUR RISK CAPITAL
Since Forex trading involves taking risks, it is essential that you trade Forex with funds known as risk capital. These funds are funds separated for the sole act of trading and are not funds needed to make ends meet. Avoid trading with funds that you cannot afford to lose.
Tip #2: BE REALISTIC
You can make steady income trading but Forex trading is not a get-rich quick scheme. Be realistic with your expectation. Many traders lose their money because they want to get rich quickly and so they trade aggressively and blow up their account. Trading conservatively and setting realistic goals will help you make steady returns over and over in your trading. Read about how to separate your Forex trading from gambling HERE
Tip #3: RUN YOUR PROFIT AND CUT YOUR LOSSES
The golden rule of Forex trading is to cut your losses and let your profit run. You can manage risks by using stop loss in a disciplined manner and allowing your winnings to accumulate when you have a winning position.
Tip #4: USE LEVERAGE WISELY
Leverage is one of the advantages of Forex trading that can help you achieve more and can also work against you. Leverage affords you the ability to trade your account for bigger profit, however, it also increases your level of exposure to risk. You can avoid using a high leverage until your mind is clear about the potential loss accompanies the use of a high leverage. Click here to register for our Free forex training classes valued at $300
Tip #5: ADMIT WHEN YOU ARE WRONG
When it is clear that you are making a bad trade, it is important that you admit that you are wrong and exit quickly. Since you cannot control the movement of the market, recognizing a losing situation and exiting it will help you curtail your losses before they grow to a damaging size.
Tip #6: DON’T BE GREEDY
Avoid being greedy, greediness can influence you to make bad trading decision. Forex trading is not all about opening a winning trade every minute, it is about opening the right trades at the right time and closing those trades that turn out to be wrong prematurely. Do not be ruled by greed!
Tip #7: ENVISAGE EXIT POINT BEFORE ENTERING A POSITION
Before entering a position, imagine what your exit point will be. Think about the levels you are aiming for on the upside and the size of loss that is sensible to withstand on the downside. This will help you to maintain your discipline in the heat of the trade and will also encourage you to think in terms of risk versus reward.
Tip #8: DO NOT TRADE ON TILT
If you suffer a bad loss or a substantial portion of your risk capital, there is always a temptation to try and win it back with the next trade. Do not yield to this temptation. Increasing your risk when your risk capital has been stressed is the worst time to do it. Instead, you can reduce your trading size in a losing streak or take a break until you can identify a high probability trade. To open a Live InstaForex trading account, click here