Hey guys, do you have a good money management rule in your forex trading? Many traders think that money management in forex trading is just by putting a stop loss and a target profit, that’s all. This is far from true because that is only part of a forex trading system. Do you know that a good trading system can turn into a losing system if you do not have good money management? On the contrary, a good money management rule can turn an average trading strategy into a winning one. Let’s look at some forex tips below.

1. Always prepare for the worst, think how to protect your trade first!

Almost all the traders will think how much money or profits they are going to make when they trade. This is a wrong mindset. If you are a beginner in forex trading, then you should assume the worst first and not thinking about profits in the first place. You should be very eager to protect your trade from losses by shifting it to breakeven after your trade has around more than 40 pips in profits. The trade is also considered won even it has broke even.

2. Dont’ take high leverage for granted.

Many forex brokers offer a high leverage of 100:1 to 400:1. True it is very tempting, but you should not use very high leverage for a beginning and for a small trading account, it is not advisable to use more than 50:1 or 100:1, so as to prevent your account from going bust. Traders thought they can win big using high leverage, but what if they loose? Their trading capital goes into the drain too.

3. Not risking more than 1% to 5% of your trading account.

This is a very important money management rule. How much do you risk for every trade? Forex trading is all about high probability and calculated risk. If you think you can’t take risk at all, then you shouldn’t be learning to trade forex at all. For a small $1000 account, it may seems by risking 1%, the gains are very small too, but that’s the right way to build your capital. For me, I’m a conservative trader and I risk only 2% of my trading account per trade.

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