Success in trading is primarily associated with the effective application of money management rules - money management. This is the most important statement of professional traders. Compliance with the rules of money management is the basis of the work of every trader who wants to work in the market very successfully. The market will not tolerate money management violations. Failure to comply with these very rules will lead any bid to failure!
This often happens with newbies who decide to subjugate the market right away. They still do not have enough experience, and they immediately want to take everything from the market at once. This doesn't happen. If a trader sticks to the principle "All or nothing", then in the end he will not receive anything, will be left without a possible profit, or will instantly drain his deposit. In essence, the market is a risky form of earnings, and not at all safe. If we talk about security, then it is necessary to strictly follow the rules of money management.
Money management in the market is the very main essence that every trader should understand when starting to trade!
In order to understand how to properly manage your capital, the trader must have a clear idea of the trading system, which should include the following components: the amount of the deposit that can be invested in one deal, the level of risk, the profit / loss ratio, and so on. ...
FOREX MONEY MANAGEMENT RULES
1. Capital management. In order to effectively manage money, you need to understand the very essence. You should only trade with personal funds. Borrowing or taking out loans should not be categorically.
2. It is not worth investing the entire available amount in one broker or one financial instrument. It is best to divide it into equal parts. This will save you some of the money if you do fail.
3. While trading, do not immediately try to increase the volume of the transaction more than tenfold.
4. Never make big losses.
The optimal loss level is at least 2%, maximum 5%. When we talk about this management item, we mean that after a bad deal, you shouldn't be poorer than 5%. Rely on this figure when placing your stop loss.
5. Always observe the profit / loss ratio
The take profit level to stop loss should be 3 to 1. When assessing the possible profit and loss, the first should be 3 times higher.
6. It is not recommended to open a large number of transactions at once if you have just started the path of a trader.
You need to work confidently and calmly. Opened a deal - set a stop, take profit. The market has gone in your direction - move the position to breakeven. Have the desired profit - close. Don't be greedy. The price knocked out on the stop - exit.
7. You should not "recoup"
No emotion. There are a lot of risks associated with them, and, as a result, losses. Always be calm and confident. The market will happily look for opportunities to catch you on your emotions and try to take your money away from you. Always remember these rules. They will help you avoid unnecessary losses and be confident in yourself.