Money Manangement

One of the proven techniques to be successful in forex trading is proper money management. Remember that almost 95% of forex trader failed in forex trading and the primary reason is poor money management.

Good Money Management alone can make you survive forex trading longer than those who do not have a sound money management. Here are the basics of a sound and good money management that you should incorporate in your forex trading.

2% Risk
Risk only 2% of your account at any given time. This alone can give you 35 consecutive losing trades and still you have only loss 50% of your starting balance.

1:2 Risk:Reward
If there is a holy grail in forex trading this will be part of it. A 1:2 risk reward ratio or better is the key to becoming a successful forex trader. At 40-60 win-loss trades and a 1:2 risk reward you will still end up with profits, how much more if you could improve it to 50-50 or 60-40 win-loss trades, your profit will even be much higher.

Trade less
Trade only valid set up of your trading strategy. Do not over trade, trade at least once or twice a day this will help you trade only profitable and less aggressive trades.

Forex trading is primarily psychological and skills is only secondary. The above money management techniques can highly improve your psychology in forex trading. Imagine placing a trade where your risk is 10% - 30% of your account, the trade will surely get into your nerves, specially if it is going against you, your heart will beat faster, you might not even get to sleep and your blood pressure will rise and when you finally decide to exit your trade and click close it then moves to hit your profit target of course sadly without you. But if you have sound and good money management it will be different. You would not sweat the trade since if you lose it is only 2% of your account. If you lose which is inevitable in forex trading you will still be comfortable since you only need to make 6-7 out of 10 trades and still have good profits.