Your survival in the Foreign Exchange Market is determined by your ability to follow strict money management rules, without them you are doomed to failure.

If however you follow good money management rules, it is virtually impossible to fail, assuming you have a sound trading system. Trader psychology is the greatest enemy of the forex trader. Everyone hopes to get rich Right now. If you pursue that mentality you may as well hand all your cash over to the broker today as you will surely lose in the long run.

Money Management is the major component that determines your success or failure when it comes to any forex trading system. When you don’t have a money management strategy then you are destined to failure. Bottom line When you have no money left you simply cannot be a forex trader!

Without distinct rules trading forex is the same as gambling. For most people that trade without rules, that is precisely what they’re doing. Sure they are going to have successful trades, but they will certainly hit a bad patch at some time that more often than not will wipe them out.

Money management rules I have adopted:

1. If you are starting out with a small account never ever risk more than 5% (maximum) on  any trade.
2. When you take a couple of trades or correlated trades simultaneously ie the eur/usd and the gbp/usd then 5% would be       the maximum exposure you should have for both trades.
3. If it is a counter trend trade never risk more than 2.5% maximum.
4. Always plan the trade and place a stop loss on entry.
5. Plan your take profit exit before you enter the trade.
6. Never take trades with less than a 1:2 risk reward ratio. For example if the stop is 30 pips, then the trade has to be able to make 60 pips.
7. If you have 2 losing trades in a row, cut your risk back to half.
8. Should you lose 3 in a row cease trading for the day and analyze your decision to take the trade. Next day either start with on 1.5% risk or go back to a demo platform, but remember stick to the rules.
9. If you have 3 wins in a row revert to 2.5%, that way you will not lose all the profit you have just made.
10.  when you get back to a 60% win/loss ratio, return to 5% maximum

As you account grows reduce your risk per trade till you are trading around 2-3% per trade.

Whether you are using a forex day trading  system or  an intra day forex system you are trying to identify repeatable patterns in the charts, these do not happen everyday, you need to have patience, if the market is not giving you a trade walk away and you live to trade another day, it will always be there tomorrow.

Have a trading plan and stick to it, no exceptions, and follow good money management rules. This forex currency calculator will keep you in check.


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