Ten Money Management Methods - Account Management

The steps below explain money management. They give practical tips to build your own equity system in Forex account management.

1. Keep the Necessary reserve (over and above the 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 and 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 the guideline that helps to avoid bankruptcy: never invest more than 2% on one single market and 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

Unlike the advice to limit investments to 5%, this principle emphasizes not risking more than 2% on any single trade position. This approach helps traders minimize losses by restricting the exposure of their equity to unfavorable trades.

4. Diversify

The use of optimal investment of your money is that you as a trader should diversify to some degree. Just In case one trade position 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

Write it down, or better yet, put it in your trading plan. When you trade, make sure it fits your money rules.

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

It's important to set up your stop orders to prevent big losses. Profit booking zones help you make extra money by taking some out of the market. Look at the situation and try to guess where prices will move next, then make your orders based on that. You can also check currency pair indicators and their ups and downs to know where to place your orders.

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

Only enter trades with a 3:1 profit-to-loss ratio. Skip the trade if you can't meet that.

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

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

This approach will yield consistent results necessary for generating profits in the currency market.

9. Don't revenge against the market

Should this occur, your decision-making will not be analytical, but wholly driven by feeling, resulting in greater financial losses.

10. Timely rest

Avoid trading when tired. Even if it looks good, stick to your schedule for better results.

Following proper trading account management guidelines is essential for profitability. Work on developing an equity management strategy that helps maximize your trading gains.

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