Money management
Many beginner traders do not understand how to manage their risks in the Forex market for a variety of reasons. Beginners seek to obtain everything at once, without respecting the simplest laws of money management and finally empty the deposit.
A money management system is a system for managing money.
In other words, effective risk management in the Forex market is risk management.
It is difficult to prevent unprofitable Forex transactions and their series.
But you may limit losses, of course, by using money management (MM) (MM).
If you are a new trader in the foreign exchange market, money management will enable you, in the worst-case scenario, not to deplete your deposit as rapidly, but in the best-case scenario, to make a minimal profit. And your primary duty is to keep losses to a minimum.
To begin, make it a rule that the proposed risk for each transaction is 2%–5%, and do not exceed it. What does it mean?
For example, if you initiate a trade with a risk of 3%, you cannot lose more than 3% of your deposit if the stop loss is triggered.
Money management, by the way, is not money management until losses are stopped.
It is required!!!
Assume that a trader has a $1,000 deposit. He starts a trade on EUR/USD with a volume of 0.1 (leverage 1/100) and places a stop loss 30 points below the buy or sell price. When triggered, the loss is $30, or 3% of the deposit. That means the risk of each transaction is 3%.
As a result, the smaller the lot you trade, the larger stop loss you may set, and it is preferable to limit your risk to 1–2 percent. The stop stays at the same level as anticipated, but the risk per transaction is lowered owing to the lot volume.
If you enter the market ten times in a row and take a 1% risk on each transaction, you will still have 90% of your deposit.
You’ve got your own method. You tried it in test mode on a demo account, and the number of winning transactions outnumbered the unprofitable ones. Long term, obeying MM (the same risk with each transaction), you will always be in the black, and this is crucial!!!
Money management is difficult for beginners to monitor; with a deposit of up to $1,000, it is extremely difficult to do so unless you trade on a penny account.
Another piece of advice is to only trade on a cent account if your first investment is less than $1,000.
Money management is more than just controlling the risk of each transaction.
It is in charge of all of your Forex trading.
For example, they withdrew 2% from the market. That’s all. There will be no trading this week. Take a break. Examine the scenario. Get ready for the next one. Be a conscientious trader!
Profit should not be pursued. Even 5% per month (or 60% per year without reinvestment) is quite excellent.
Remember that the more often you join the market, the greater the danger. You must also manage the risk. Take a look at the article “Easy Forex Strategies To Organize Your Work,” in which I wrote an outline about money management.
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