Ten Money Management Methods - Account Management

The process below describes the process of formulating money management & practical advice on developing your own equity management system in Forex - account management.

1. Keep the Necessary reserve (over & above the online broker margin requirement)

This reserve is needed for unusual situations and it should be not less than 50% of invested equity. It is the first rule of account management in margin trading definition for opening orders. However, many experts & analysts advice more reserve of about 70 % - 90 % of invested account capital for safe operation in forex.

2. Do not to invest more than 2%-6% - Account Management Guidelines

This is one of principle that helps to avoid bankruptcy: never invest more that 2% on one market & do not to invest more than 6% in the total open trade positions.

3. Never risk a loss of more than 2% of invested money on any single trade - Account Management Guidelines

This is not the same as above, the above is never invest more than 5%, this is never to lose more than 2% on one trade position. In this case a fx trader risks only to lose a small portion of his equity with an unprofitable order.

4. Diversify

The use of optimal investment of your funds is that you as a trader should diversify to some degree. Just In case one trade losses, the trade transaction order can be covered by profits of another trade.

5. Money management rules should be well written down - Account Management Guidelines

On a piece of paper or better still in your trading plan. If you open orders on this orders should be within your equity management guide-lines.

6. Define your stop loss and take profit levels - Account Management Guidelines

When you're trading put your stop orders in order and so as to avoid any huge losses. profit booking zones will ensure you get extra/additional profit by taking money out of the market. Analyze the situation and predict the future movement direction of price action & place orders accordingly. You can even use indicators and volatility of the currency pair to know where to place these orders.

7. Define of a possible loss or profit before executing and opening a trade - Account Management Guidelines

Consider only opening trade transactions when you've got the chance to get profit against loss ratio of 3:1. If you can't do it then don't open the trade order.

Money management should seek to bring maximum profit to the traders account, keeping profitable trade orders as long as possible is a good strategy. Hence, if you make some profitable trade orders you as a trader can have goods trading results.

8. Try to follow the rules of opening & closing the trade orders specified on your plan.

That way you'll get consistent results required for earning profits in the currency market.

9. Don't revenge against the market

In this case, you'll not be interpreting the situation but you'll just be trading based on emotions and you'll lose more money.

10. Timely rest

Don't trade when you are exhausted, no matter how tempting the situation may seem, you might not get the profits that you as a trader can if you were to trade based on your trading schedule.

Considering these - Account Management Guidelines & Guidelines can make you trade profitably. Try to develop your own equity management strategy that provides you with good trading profits.

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