When you’re trading or investing in the Forex market, just like in any other financial market, you’ll be facing losses; no all trades will be profits. So, in order for you to be a successful trader you need to maximize your profits and to minimize your losses. But this might seem easier to say than do…
What you need to do is to primarily think about not making money but on protecting the money you already have. If you have this as your first goal, you’re definitely in the right track to success. Just think about it… You’re trading with your hard-earned money. Why risk it all or a major part in a single trade?
As a good rule of thumb, you should never risk more than 2% to 5% of your trading capital. This is not an easy rule to follow especially if your trading capital is limited. But why don’t you try to use a demo account to see if the system you’re using is really that consistent and profitable, even by accomplishing this rule? Remember that this is one of the crucial steps you need to make in order to succeed…
The best quality you need to have when trading Forex is discipline. And this discipline will help you on all aspects of your trading. This will help you:
• keep your emotions out of the game
• maintain the 2-5% money management rule
• protect your money as your first goal
• follow a specific trading plan
• be within the 5% Forex traders group who actually make money, consistently.
Another good strategy is to always use a stop loss. This stop loss should be adapted to the system you’re using, since it cannot be too tight or too narrow… But using it or using a trailing stop is a vital thing to protect your capital. Even if you don’t place it with your broker but just know where you have it, and execute it if it’s time…
As a final comment about money management and discipline, when in doubt, stay out of the market. The Forex market gives us so many opportunities to trade and to make money that the best thing you can do is not to trade when you’re not certain.
Remember to trade lighter and never risk too much per trade.
I have even more stringent trade requirements, I only use 1 or 2% MAX, and the risk is calculated from the entry point to stop loss point. + the spread. ie 2% of 5K = $100, entry to stop loss is 95 pips, spread = 5 , so $100/(95+5) = $1/pip or 0.10 lots
so I use 0.10 lots for this trade. I always use a trader who allows 0.01 lots, oanda allow lot sizes of 0.00001 lots !
I always read these professional guide but anytime I sit to trade I found I hardly follow them thus incur losses
Perrie:
You’re doing the right thing.
Good Luck!
Ramoni:
You need to have discipline. If you don’t trust the system you’re using, develop or buy another one. And please test it on a demo account first.
Good Luck!