There are some aspects to Forex trading that can make the eyes of a novice trader glaze over, and one of these is something known as money management. One often made mistake of a first time Forex trader is that they will not plan in advance their trading options and can often suddenly finding themselves placing Forex trades in a hap hazard fashion.
Simply placing a Forex trade based on chance or luck can, and often will, result in you making a winning trade and returning a profit on that trade, however luck and chance are two words that a more experienced and successful Forex trader is never going to describe in regards to the way they trade.
The only way you are systematically going to make repeated profits as an online Forex trader is by having a very strict yet maybe slightly flexible money management system, and this is going to ensure that no matter what happens during any one single online Forex trading session you will always know in advance how you are going to react.
With this in mind below we have put together an overview and step by step guide which will enlighten you of how you can put into place your very own Forex trading money management system. Have a look through this guide as you may find it very helpful when you do decide to start trading Forex online at any of our licensed Forex Brokers.
Maximizing Your Trading Budget – The one major way of enhancing and maximising your trading budget is by signing up to and claiming bonuses at several different Forex Brokers. The offers and special promotions you will come across will often massively increasing your trading budget, and by spreading the risk with those bonuses it is hoped you will make additional profitable Forex trades.
Pricing Each Individual Trade – You have to understand the actual risks you are taking on every single Forex trade you place, and as such this will call for you to know exactly how much you will be trading one every single trade placed.
So never just think up a figure when allocating funds to any trades, instead work out exactly the level of potential profit and equate those stakes to your currently available trading budget. Over staking is the one main reason that any first time Forex trading will lose their entire trading budget, so always keep a level head and pre plan the value of any and all Forex trades you place.
Planning Your Profits – A successful Forex trader will always have in their mind a figure they are aiming to make each day, the lower the figure the more chance you have of making those targets. So why not put into place an initial trading strategy that will see you aiming to earn just 5 to 10 percentage of your trading budget in profit initially? This is a modest increase but you are always able to adjust your winning goal whenever you like on any additional trading sessions you make.
Knowing When to Limit Losses – Not every trading session you have is going to be a winning one, and always keep that fact in the forefront of your mind. A good money management system will call for you to get out and stop trading when your trading budget has dropped in value by a certain percent. So put into place a stop loss limit and if you hit that limit call it a day and end your trading session.
Learning to Cash Out Regularly – One final part of having a well thought out money management system is that you need to get used to cashing out your profits regularly. Whilst all Forex Brokers will allow you to keep your funds in your trading account at their respective sites, by cashing out regularly this will enable you to never run the risk of over trading or losing back any returns you have successfully made.
But do keep in mind that you need to utilize Forex Broker that are not going to hit you with any excessive fees or charges when you make a withdrawal of funds from your trading account, so always double check for these often high fees before signing up to just any Forex Broker!