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LESSON: Money Management
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[op_liveeditor_element data-style=””][text_block style=”style_1.png” align=”left” font_size=”16″ font_font=”Montserrat” font_color=”%237e7e7e”]You should always be risking the same amount of money either in dollars or percentage of your account per trade.
This is called money management and before entering the trade we always work out how much we are prepared to risk.
In the next lesson I will show you exactly how to work out your trade size before your enter your trade and also do something we do here at Forex School Online called “Split Your” orders.
However;
Earlier in the course I stressed to you the importance of hunting the best A+ trade setups that are large and obvious and also commanding.
Often this is overwhelming for new traders especially when they move to daily and 4 hour charts because one of their assumptions is they do not have enough money to trade these setup because the stop sizes are larger.
The stop size should not affect whether you play the trade or not – now let me put that into context… I am saying that from a trade position and money management point of view – NOT trade analysis point of view. If the stop is too large for your risk reward profile or some other reason, the fair enough.
However; whether the stop is 20 pips or 200 pips should not make a difference and should be risking the same amount of your account in money or percent each and every single trade!
Why We Never Bet the Farm on Any #1 Trade!
Money management is part of the glue that will hold your trading account together and looking healthy.
It is for this very reason we never risk more than a few % if risking percentage or a certain amount of money if using fixed $ per trade. Risking a set amount every trade will allow you to sustain the losers and remain in business and more importantly capitalise on the winners.
You NEVER KNOW when you are going to hit a string of losers and no matter how fantastic that trader right in front of you looks, the worst thing you can do is increase your risk ‘because you like the look of it more than the other ones’.
To create a trading edge over the market you need to carry out your plan every single trade the same as the last and that means not individually picking and choosing what trades should have more risked and less risked on them over the others.
What this does is if you risk 3% win, 3% win, 3% win and then see a really great trade and risk 10% because you have been on a winning streak and this would put your account way up… and BAM there goes 10% because we cannot
Money management and in particular good money management will increase your edge substantially simply by rewarding you when you’re winning and minimising the pain when you lose.
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Risk Reward & Managing Trades in Different Markets:
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Module Twelve
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[op_liveeditor_element data-style=””][text_block style=”style_1.png” align=”left” bottom_margin=”10″]Duration: 25 mins[/text_block][/op_liveeditor_element]
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Action Steps & Downloads / Links
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