FOREX MONEY MANAGEMENT TECHNIQUES

If there is a Holy Grail in trading this is the only one that exists. Trading is a statistical approach to market data and the only thing professional traders try to do is minimize risk. Risk is always there especially in Forex market which is a high risk-high reward market.

Money management is the strategy applied to minimize losses and maximize profits. Consider this example. A trader begins trading with 1000 USD account. If he loses the 25% of this amount then has to profit 33% of the remaining money (750 USD) to reach 1000 USD. If he loses half the money then has to replenish 100% of the remaining money (500 USD). See how much percentage of profit based on the remaining money has to get to replenish the loss if he loses 75% of the original account. This example shows us how careful one should be when trading. Mind your loses. Let the profits come!

There are 3 golden rules in money management:

1.Never risk more that 10% of your account per trade. 
This means that if you have a 1000 USD account you should never risk more that 100 USD per trade.

2.Your risk per reward ratio should be at least 1:2
This means that if you decide to trade then for example you should risk 30 pips only (implement stop loss orders always) when you expect a 60 pips profit at least (limit order).
Analyze the market. Have a trading plan. Always use stop loss orders and limit orders with 1:2 ratio. This way you may have two trades wrong but the third trade right and not lose a penny. In the course of time the possibilities of being profitable are with your side.

3. Never put a trade without stop loss. And I mean never! Do not expect the market to save you when you are positioned wrong.