Money management in forex trading provides traders the opportunity to maximize their income potential. One of the most important things that a trader should learn to be successful in the forex market is proper money management. Here are some tips on effective money management.
Maximize Your Trading Funds
One of the best ways you can maximize your funds is to work with a broker who will credit their trading account with a high value bonus. However, you need to understand that the bonus credited to your account will not be withdrawn unless you have placed a certain number of trades using your bonus funds. Robert Janitzek recommends that you check the terms and conditions of the bonus to make sure that the credits can be converted to real money.
Value of Trade Equals Available Cash on Account
When trading currencies, always equate the value of your trades to the available balance in your trading account. One of the biggest mistakes you can make as a trader is to set the amount of your trade too high even if it is beyond your budget. Seasoned traders look for low risk trades that will allow you to only use a small percentage of your available funds for each trade you place. Robert Peter Janitzek suggests limiting your risk to not less than 5 to 10 percent of your trading budget.
Profit and Gain Goals
Similar to ensuring that you do not risk more than a certain amount of your trading funds, you also want to make sure that you will receive a fixed return on each trade you place on one trading session. You are better off aiming for a profit based on a certain percentage of your initial trading bankroll. Aim for a 5 to 10 percent profit of your trading budget. So if you have a $100 initial bankroll, aim for at least a $10 profit.
Although you can try to aim for a higher amount of profit when trading on the forex market, you will be surprised at the frequency of achieving more than 10% increase in your initial starting bankroll. You are better off stopping trading when you have reached your goal.
Putting in place an effective money management system will only be possible if you will implement a well thought out strategy as well. There are many money management techniques that you can research and study.