Money Management in Forex

Gujind said:
That is a one more disputable and philosophical question about trading.
I personally believe that money management is a must for a trader if they want to have consistent and stable profits over some long period of time. I mean that there is nothing 100% sure about the financial markets and the traders have to work with the probabilities. As we all know, probability cannot be 100% and there is always some room for the things to go completely wrong. So, even if you take the decisions whose success is 90% (which unreal though, but still...), 10 deals out of 100 will be a disaster. That is why, it is of vital importance to secure and hedge your budget from blowing up. That is where money and risk management come into play.
The very essense of such phenomena is not to let you budget go to the hell. Surely, by following the priciples of money and risk management, you profits will not be as high as if you traded each deal with your full budget, but in such a case your money is protected from the total loss and that is a necessary practice for you if you are not a gambler but a trader and if you want to earn from trading in the long run.
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Couldn’t have said it any better! Without money and risk management, forex trading would feel like gambling, so every trader should make sure that they implement the right money and risk management strategies while trading.
 
Forex money management is a set of processes used by forex traders to manage funds in their forex trading accounts. Forex money management is designed to minimize trading losses and make them "manageable". This means that when a trade turns into a loss, it does not prevent the trader from winning other trades.
 
Money management is vital to successful trading. Hence why new trader should open micro/cent account instead of demo account so they can start trading with real money, which is more beneficial for risk and fund management as you tend to be more careful when trading with your own money.
 
You won’t know how it feels to lose money if you don’t lose it. A demo account won’t help you with that and so, you may not learn money management on a demo account. It’s better to open a micro account where you will be taking small risks and knowing what it feels like to trade in reality.
 
The reason is simple: Just like eating healthy and staying healthy, managing money can seem like a strenuous, unpleasant activity. It forces traders to constantly monitor their positions and take necessary losses, which few like to do.
 
bidskis said:
You won’t know how it feels to lose money if you don’t lose it. A demo account won’t help you with that and so, you may not learn money management on a demo account. It’s better to open a micro account where you will be taking small risks and knowing what it feels like to trade in reality.
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I totally agree! Trading on a demo account and trading on a live account is very different from each other. Demo does not allow the development of good trading psychology as real money is not involved. Until a trader practices trading on a live account he doesn’t learn to regulate his emotions. I’d suggest using a small live trading account instead of jumping directly from a demo account to a standard live account.
 
More than thinking about what you would do when you make a profit, you must think about what you would do in case of a loss. And before that, you must check if you are managing your money properly in a trade.
 
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