Thread: Not Having Money Management...

I am constantly amazed at how few Forex traders and brokers have no concept of money management. Money management is controlling your risk through the use of protective stops, while balancing your potential for profit against your potential for loss.

An example of poor money management I see almost daily... many traders refer to a trade that might lose them $500 if they are wrong and make them $1000 if they are right as a two-to-one risk/reward ratio. Yet, that is wrong because it is just as important to knowing proper win/loss ratio of knowing how much you are going to lose if you are wrong and how much you are going to make if you are right, but what are the odds of making money... of being right? What are your odds of losing money, or being wrong?



Good money management means you know your profit objective and the odds of being right or wrong, and controlling your risk with protective stops. You are better off with a trade where you might lose $1000 if you are wrong and make $500 if you are right, that would work eight times out of ten, than to take a trade where you would make $1000 if you are right and lose only $500 if you are wrong, but works only one time out of three. Obviously, this mistake can be overcome only by developing and testing money management concepts. An entire book could be written on money management principles... but the key is knowing your win percentages along with proper risk/reward ratios.

Yes, I totally agree man! Good money management is essential for a Forex trader.
I have found some useful articles on Forex money management
forexcontestnews.com/forex-money-management
Hope it will be helpful!

It's a good advice...thanks!

Thats right! You really need to know money management to avoid losing money and what to do to avoid losing them when u see ur chart drop