Money Management
Money management in Forex Trading is one of the most important items that YOU will have to be disciplined at in order to succeed. Greed and overnight riches are not in the plan, a steady growth of income can be achieved if YOU follow some simple rules. 1st of all YOUR using a demo account so YOU have no real money to lose or make for the matter. YOU should try to think of it as YOUR own live account so that YOU do not just make reckless decisions that YOU would not do in a live account. YOU are using the demo so that YOU can learn to use the information gained hopefully someday in a live account.
Step Three. Determine YOUR risk tolerance. This is money YOU do not need to live on month to month and could lose with out suffering an emotional breakdown. So how much could YOU lose? Not all trades are winners, if You cannot accept a loss, then do not trade.
A standard Forex Trading risk amount of YOUR balance is 1-2%.
Micro Accounts = $0.10 per pip
Mini Accounts = $1.00per pip
Standard Accounts = $10.00 per pip
Divide your risk capital by the type of account YOU have and pip value you have to determine how many pips YOU have in your risk capital. Demo accounts are usually $1 per pip with one lot. That means if YOU trade 10 lots YOU would be at $10 per pip.We will use $1 per pip as the example.
YOU want to come to some determination on how many pips YOU will lose before YOUR trade is shut down or comes to a stop loss. Some trades go -500 pips and come back around to make positive pips. It depends on the providers strategy. So we will use $1000 and divide by 400 pips loss per trade. 400 goes into $1,000 2 times so YOU can only have two lots at risk at one time. This could be two trades with one lot each or one trade with 2 lots. YOU must determine YOUR own pip loss tolerance.
These settings are set by YOU in the settings tab on YOUR account. The whole purpose here is to get YOU to understand how to manage your risk, set YOUR positions, and see how the provider works. YOU must only think in the terms of how much YOU can lose in each trade first and not how much YOU can make.
Other things to consider are how many trades at once are YOU going to open. Some providers open several up to 15 trades per day. Set YOUR settings accordingly to what YOU want to risk. YOU do not have to take 15 trades in one day. Study the drawdown and stop losses used by the providers and use ones that are within YOUR tolerance.
Remember the 20 pips a day is a good place to start.
Here is an example of how just 20 pips a day can grow for YOU. If YOU use a disciplined strategy of risk capital. YOU will soon see why Forex is growing every day by leaps and bounds. How much would YOU have in your savings account with a starting balance of $1000.00 and a interest rate of 5% after one year? After one month? After one day?
Trade #of lots Pips Profit this Trade Total Profit Account Balance
1 2 20 $40.00 $40.00 $1040.00
2 2 20 $40.00 $80.00 $1080.00
3 2 20 $40.00 $120.00 $1120.00
4 3 20 $60.00 $180.00 $1180.00
5 4 20 $80.00 $260.00 $1260.00
6 5 20 $100.00 $360.00 $1360.00
7 6 20 $120.00 $480.00 $1480.00
8 7 20 $140.00 $620.00 $1620.00
9 8 20 $160.00 $780.00 $1780.00
10 9 20 $180.00 $960.00 $1960.00
11 10 20 $200.00 $1160.00 $2160.00
12 11 20 $220.00 $1380.00 $2380.00
13 12 20 $240.00 $1620.00 $2620.00
14 13 20 $260.00 $1880.00 $2880.00
15 14 20 $280.00 $2160.00 $3260.00
16 15 20 $300.00 $2460.00 $3460.00
17 16 20 $320.00 $2780.00 $37.80.00
18 17 20 $340.00 $3120.00 $4120.00
1 18 20 $360.00 $3480.00 $4480.00
20 20 20 $400.00 $3880.00 $4880.00
After one month of trading YOU have 20 trades. One for each day. If YOU lose a trade YOU go back one trade, if YOU lose again you go back another, if YOU win YOU proceed forward. Don't try and jump ahead, once YOU do that you risk more and YOUR cut your balance too short to make up losses.
On big news days YOU may not want to trade at all. Thus putting YOUR account at a lesser risk for the unknowns. Most news is already built into the price.
Thats the basics. As YOU begin to learn how to use the Zulutrade platform and see how easy it is to use ,YOU should not be compelled to buy any of the other to good to be true stuff out there. YOU already have some of the best EAs or providers working for you right here and get to use them for free. Some of the top ten providers have over $20,000,000.00 in live trader accounts following them. That should speak for itself. FXCM is the largest forex broker in the United States and has built up a great reputation in the Forex Market.
