The number 1 thing that separates winning traders from the rest is forex money management, not forex trading strategies or how smart you are.
Here are 4 forex money management mistakes trader make. Don’t forget to tweet, like and share at the end of the post.
#1: Focusing On The Money And Not The Trading Process
When I trade, its not hard to think about money.
How much money I am risking and how much money I will make if my trade is profitable. Sometimes counting my eggs before they hatch…
Is this the right way of thinking?
And I will explain why shortly.
Money is a great motivator…no doubt about that.
Have you seen or read stories of people who are passionate about doing something and eventually made a lot of money in the process?
You see, money follows people who have a process or system in place. Read that again…”money follows people who have a process or system in place.”
What this means is really simple: follow a process, concentrate on the trading process. Be a diligent in the trading process.
And if you do, money follows.
#2: Under Capitalization
Here’s a fact I have learnt…when I started trading small trading accounts, like $150, I wasn’t happy with the profits I was making on that account.
It was too small!
The amount of profits you can make is limited by your trading accounts size because you have to consider leverage and margin etc.
So if you are thinking of making $500 to $1,000 a month in forex, don’t open a trading account size of $150 because guess what?
You will be increasing your risk thinking you are going reach that goal.
This is the fastest way to blow up your trading account.
It is better to really fund your trading account appropriately instead of playing around.
If you want high forex income but you don’t have the account power to make that happen then you are putting yourself in a situation to risk more to achieve your desire and this leads to blowing up your trading account which will cause you more frustrations and headaches.
#3: Exiting Too Early
Are you taking profits too early?
One thing I have observed on myself is this: when I place a trade and that trade is in profit and if I continue to sit and watch my profit go up and down, sooner or later, I’m going to micro-manage that trade.
Which essentially means like babysitting a trade to nature my trade or exit quickly if I see signs that the market may turn against my position.
What tends to happen is that I will exit too early.
Next time I check that chart where I took that trade, I feel like bashing myself up because price has moved 200 pips to the profit target I initially set but I bailed out too quickly with only 20 pips profit!
One of the best ways to overcome this is to place your trade and just walk away! Let the market do its job!
#4: Risking Too Much On One Single Trade
I’m notorious for this one and I got to be honest…I’ve blown a lot of forex trading accounts because of this.
Every trade has a potential to be a looser. So don’t get confident and cocky and think that the trading setup happening is going to work out like in a text book.
It is a really simple math…you risk more, you loose more. If you are right, you make more.
If you want to last a long time in forex, cut down on how much you risk per trade. Aim for 1% or 2 % trading risk per trade.
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