Beware Wrong Implement Money Management!
Money Management – In order to succeed in forex trading, not only is the strategy planning strong, but the use of money management is also considered to be very influential.
Money management is the governance of funds to manage the running of trading.This will relate to how much lots in each trading position, how much distance between open prices and stop loss, how much profit target you want, and how many maximum positions you want to open at one time simultaneously.
Forex trading can indeed provide quite a lot of profit opportunities, but not closing the risk of loss will also be greater. It could be before getting a profit you actually get a loss. You may also experience a loss of succession without knowing when to get a profit.
The use of Stop Loss is quite large can indeed be one way to limit losses, but what if there is a loss in a row? Of course the amount of loss will be higher. Even to be able to reverse the situation is also considered quite heavy, because the profits earned for months will eventually disappear overnight. Not only that, the psychology of traders will also drop more, so the quality of trading will be affected.
Therefore the implementation of money management is considered the most appropriate to overcome this condition. For example, traders can search for a system that can generate a risk vs reward ratio, at 1: 1. So if the greater the comparison means the better.
But can not be denied that there are also traders who still fail when using money management. Here is an error that causes you to fail in applying money management.
Creating a target is sometimes very good, but in forex trading if you turn out to focus on the target it will tend to be dangerous. Here are some examples of targets commonly made by amateur traders:
- Profit percentage in 1 month
- Profit generated for multiple times trading
- The length of time it takes to earn dollars.
Although different, the three targets are basically the same, namely the desire to get a profit in quick time. Whereas in fact in forex trading there is no definitive answer that can be a guarantor to be able to achieve targets consistently. Why can it be like that? You can try to look at your trading chart, then see that the movement will be very volatile when it will form the price. In addition, the price also will not be predicted with certainty.
Technical players may say that a price pattern will continue to repeat with the same, but the reality of the price will not only be driven by one factor (technical).There are other factors that can affect the market sentiment is the fundamental issue. So, it is very impossible if you set a profit target of a percentage for 1 month then hope that the standard will be truly fulfilled. It is still done by many traders.
The existence of demands to be able to pursue targets actually starts from a mistake when making arrangements in money management. Before traders choose a particular method, not a few traders who even set the desired target first. As a result, traders will only be able to carry out their strategies and methods to be able to pursue targets only, eventually leading to a violation of trading rules and resulting in overtrading.
When making money management arrangements, it is highly recommended that you do not set targets at the beginning of trading. You can use the usual profit growth scale calculated at the end of the period as an indicator of success. For example, after 6 months of trading you can generate 15% growth, then in the next 6 months it will increase to 20%. That way, you are not only required to meet the target but can evaluate performance at the end of the trading period.
Use of Pips Units
Have you ever heard a sentence like this “Signal to Sell EUR / USD, Get a 100 Pips Profit Opportunity!” Or this “Follow this 1000 Pips Producing Trading Strategy!”?If ever, you should be careful and do not be easily consumed with many pips that have been mentioned, because the loss and also profit is still very relative if it will be measured in pips.
Don’t just because you are used to hearing traders who say their losses and profits are in pips, you can also use them in your money management settings.Due to the fact the pips will only reflect the magnitude of the price movement, not on the actual profit amount.
1 pip for the standard lot user will be different from 1 pip in the micro trader. A trader who claims to be able to get a profit of 500 pips without saying profit in units of dollars can be ascertained that credibility cannot be taken into account, because he could only use a small lot. If it is true, then the context can not be equalized tarder who get a profit of 500 pips with the use of large lots.
Complete With Capital Ability
Forex trading can indeed start with $ 10. But is it realistic if you use $ 10 on trading with the use of standard lot? Even if leverage is 1: 1000, the money will still be less than the margin you need to be able to open a position on EUR / USD.
So that you are not mistaken when it will determine the lot and limit the opportunity then you should have adjusted the amount of lots with your capital. It is considered very important in order to ensure the resilience of sufficient funds.It is better to have free margins that remain so minimal the consequences of MC can be triggered when new prices have moved to fight your trading.
Usually many experienced traders using standard lot now also have started trading with its small risk. So if you can minimize the risk of successful eating, the continuity of funds will be guaranteed and can open opportunities for them to grow profit gradually.