The number 1 thing that separates
winning traders from the rest is forex money management, not forex trading strategies or how smart you are.
Here are 4 forex money management
mistakes trader make. Don’t forget to tweet, like and share at the end of the
post.
#1: Focusing On The Money And Not
The Trading Process
When I trade, its not hard to think
about money.
How much money I am risking and how
much money I will make if my trade is profitable. Sometimes counting my eggs
before they hatch…
Is this the right way of thinking?
No.
And I will explain why shortly.
Money is a great motivator…no doubt
about that.
Have you seen or read stories of
people who are passionate about doing something and eventually made a lot of
money in the process?
You see, money follows people
who have a process or system in place. Read that again…”money follows people
who have a process or system in place.”
What this means is really simple:
follow a process, concentrate on the trading process. Be a diligent in the
trading process.
And if you do, money follows.
#2: Under Capitalization
Here’s a fact I have learnt…when I
started trading small trading accounts, like $150, I wasn’t happy with the
profits I was making on that account.
Why?
It was too small!
The amount of profits you can make
is limited by your trading accounts size because you have to consider leverage
and margin etc.
So if you are thinking of making
$500 to $1,000 a month in forex, don’t open a trading account size of $150
because guess what?
You will be increasing your risk
thinking you are going reach that goal.
This is the fastest way to blow up
your trading account.
It is better to really fund your
trading account appropriately instead of playing around.
If you want high forex income but
you don’t have the account power to make that happen then you are putting
yourself in a situation to risk more to achieve your desire and this leads to
blowing up your trading account which will cause you more frustrations and
headaches.
#3: Exiting Too Early
Are you taking profits too early?
One thing I have observed on myself
is this: when I place a trade and that trade is in profit and if I continue to
sit and watch my profit go up and down, sooner or later, I’m going to
micro-manage that trade.
Which essentially means like
babysitting a trade to nature my trade or exit quickly if I see signs that the
market may turn against my position.
What tends to happen is that I will
exit too early.
Next time I check that chart where I
took that trade, I feel like bashing myself up because price has moved 200 pips
to the profit target I initially set but I bailed out too quickly with only 20
pips profit!
One of the best ways to overcome
this is to place your trade and just walk away! Let the market do its job!
#4: Risking Too Much On One Single Trade
I’m notorious for this one and I got
to be honest…I’ve blown a lot of forex trading
accounts because of this.
Every trade has a potential to be a
looser. So don’t get confident and cocky and think that the trading setup
happening is going to work out like in a text book.
It is a really simple math…you risk
more, you loose more. If you are right, you make more.
If you want to last a long time in
forex, cut down on how much you risk per trade. Aim for 1% or 2 % trading risk
per trade.
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The
number 1 thing that separates winning traders from the rest is forex
money management, not forex trading strategies or how smart you are. -
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