Why do a lot of profits turn into a loss position (loss) and good trading strategies produce more loss than profit? As continuation from the previous article about the role of mind in forex trading, here we are going to talk about the second M on the three pillars of forex trading: Money.

As continuation from the previous article about the role of mind in forex trading, here we are going to talk about the second M on the three pillars of forex trading: Money.

 

Money

Why do a lot of profits turn into a loss position (loss) and good trading strategies produce more loss than profit?

I trust and believe that if a trader already has a good trading strategy, another important factor that determines this is in the management of money (money management). Money management is how you manage risk in trading, which distinguishes winners and losers in Forex trading. Beginners always think how much money they can get from the Forex market; experienced traders think how much risk they should account for to make money. Many traders, without thinking, jump into the trade by using large capital with no proper money management. Poor money management is the reason why so many traders lose money in a short time. The main goal of money management is to SURVIVE IN THE FOREX MARKET IN THE LONG TERM, because if you cannot survive in Forex trading till the next day, you can forget all of your dreams.

Winners
Money management is also about how to optimize the amount of capital in your account. It allows you to be proactive in managing risks and to face any loss in trading Forex- where this is part of the Forex game. It is really important to make sure you still have the capital to trade at a later date. It is possible to have a trading strategy with 90% accuracy but still losing money because you do not have good money management. No matter how great a trading strategy is, there will always be a loss that you will experience. Success comes to those who manage money, the risks and have the discipline to stick to these rules.

 

Prepare Your Capital

Almost all traders who enter the Forex business do so because they think there is a prospect for them to make money in a short time. This can be true; however, many traders eager to make a lot of money in a short time, forgetting about the long term.

When you forget about risk in Forex trading, you would only expect a certain amount of money that you have in your account to change overnight. But if all the money you had was lost in a single night, how you will make a profit next day? Money management is particularly important in Forex trading. But one thing to note is to prepare your capital. Do not use money that does not belong to you! Forex business is serious business. Use your time to accumulate enough capital to start this Forex business.

 

Use Enough Capital to Start Trading

Traders who do not use enough capital in Forex trading usually use a strict stop loss, which will easily stop out. They also usually have large losses that do not make sense when compared to the amount of capital they have.

Having sufficient capital allows you to be more flexible in entering a trade. You can use a smaller lot or have a larger stop loss without risking more than 3% of capital in the account.

The important point is to start trading with enough capital. That way, you will be able to follow your money management rules and risk rules, and by doing this, you have a greater chance to survive in the Forex business.

To be continued to part 3...