Money management might be the most important thing you will ever learn as a trader. People who are making millions of dollar in Hong Kong knows the exact way to manage the risk profile. You have to think from an investor’s point of view to change your life. Find the balance point between risks and reward so that you can evaluate the position in every aspect of life. This article is not going to be your traditional read. You will be learning many new techniques and if you manage to implement those techniques at trading, you can expect to be one of the best traders in the world.
Trade with your idle money
You may be wondering this not the rule of money management. But this should the foundational step before you invest the money. People who are investing their life savings in the Forex market are doing very badly. They are always under heavy pressure to get back a decent return. But such an approach leads them to make bad decisions at trading. You have to take your step in a very orderly manner. Once you invest the money that you can lose with a big smile, you will be taking quality trades. The losing trades are not going to harm you. Most people ignore this rule and for this reason, the majority of the investors are still failing to earn money at trading.
Risk 1 % of the account balance
The reason most people get confused about the nature of the investment business is the leverage. They are taking the leverage in the wrong manner and executing the trades with aggression. The low-end brokers are promoting high-risk trading strategies and causing this great trouble. But brokers like Saxo don’t encourage to trade with insane leverage. Visit their website and you will know a lot about the safe trading environment. You should be risking only 1% of the account balance at the initial stage. By taking a 1% risk, you are creating the path to keep things safe. It will give you the ultimate freedom to make money more strategically. As you learn about the risk percentage factor, you become great at trading. Stop rising more than 1% even though you have a perfect setup.
Betting against the trend
Do you trading against the trend is more like violating the rules of money management. To be on the safe side of trading, you should be taking the trades with the major trend only. Once you start taking the trades with the major trend, you will feel the difference in your approach. This will give you the perfect window to open the trades in a very strategic way and this will make yourself a better trader. Learn to analyze the major trend in the daily time frame so that it becomes easier to decide to trade. As you learn about the essentials of the trend trading strategy, you will be more confident with the approach.
Never become a greedy trader
You should trade with a valid routine. People who are taking the trades without having any valid trading routine are called the greedy traders. They are taking random trades just to earn as much money as they can. But such an aggressive attitude always leads to big losses and forces the investors to lose most of the time. Being a naïve trader, you can use many different techniques but it will be never helpful. For the safety of the investment, you should control the greed at trading at any cost. By learning to manage greed, you will learn a big part of money management. And remember, investment is a very easy business but we make it hard. So, use the tips in this article and start seeing the positive change in your life.