Investors with a money management system included in Forex trading plans know how to control the money they risk in any Forex transaction. When they receive an incoming signal from trading systems, they already know how much money they can invest. They usually invest in terms of the percentage of their capital, and this percentage is always stable. By risking a fixed percentage of the investor’s capital, the Forex trader gradually increases his wealth as he gains. On the contrary, when he loses, his wealth gradually diminishes.
The trader’s profile is an integral part of the money management system. Common trader profiles include Day Trader, Swing Trader and Position Trader. A day trader is someone who orders everything at the end of the day. It also trades in high volumes. The general goal of a daily trader is to have a fast turnover. The swing trader works longer. The position can be maintained for several hours or even days. Timing is key for a swing trader. The position trader gets the longest time frame. He can even hold on to his position for years. It looks at interest rates, government decisions and economic models before making trade decisions. A trader’s profile can determine what management system he has.
The size of the lot or trade also determines how the trader can manage his money. This is primarily determined by the amount of money entering his trading account. It is highly recommended that one’s trading capital be worth at least 3 campaigns, each consisting of ten trades.
Leverage is also part of money management. Although the dealer / broker sets the maximum leverage a trader can use, the investor usually determines his leverage based on each transaction with account size and trading size as factors that will help determine the leverage.
The total capital in the game, which is the percentage of the account used for the margin at a given time, is determined by the number of open auctions, trades and the trader’s leverage at the same time. The recommended number of open trades for new traders is two, and most of the total capital is in the game.
The use of stop loss is also a component and should be consistent with the money management strategy. The interest rate at which an investor is willing to take a risk is an important factor in determining a loss. After calculating the interest, the trader must be sure that he will not exceed that percentage in any Forex transaction.
Managing operations while in office is also important in managing one’s money. The loss can be adjusted when the investor makes a profit from an open transaction, but he must make sure that he does not take too much risk. Proper money management involves learning to stop.
Forex currency trading can be very profitable, but also very risky. Any wrong decision can cost a person capital, so the investor must follow proper money management to protect his wealth.