abdulla1 Posted June 11, 2011 Share Posted June 11, 2011 What is Money Management: describes strategies or methods a player uses to avoid losing their bankroll. Money management in the foreign exchange currency market requires educating yourself in a variety of financial areas. First, a definition of the foreign exchange currency or forex market is called for. The forex market is simply the exchange of the currency of one country for the currency of another. The relative values of various currencies in the world change on a regular basis. Factors such as the stability of the economy of a country, the gross national product, the gross domestic product, inflation, interest rates, and such obvious factors as domestic security and foreign relations come into play. For instance, if a country has an unstable government, is expecting a military takeover, or is about to become involved in a war, then the country's currency may go down in relative value compared to the currency of other countries. The Forex, or foreign currency exchange, is all about money. Money from all over the world is bought, sold and traded. On the Forex, anyone can buy and sell currency and with possibly come out ahead in the end. When dealing with the foreign currency exchange, it is possible to buy the currency of one country, sell it and make a profit. For example, a broker might buy a Japanese yen when the yen to dollar ratio increases, then sell the yens and buy back American dollars for a profit. There are five major forex exchange markets in the world, New York, London, Frankfurt, Paris, Tokyo and Zurich. Forex trading occurs around the clock in various markets, Asian, European, and American. With different time zones, when Asian trading stops, European trading opens, and conversely when European trading stops, American trading opens, and when American trading stops, then it is time for Asian trading to begin again. Most of the trading in the world occurs in the forex markets; smaller markets for trade in individual countries. Simply put forex trading is the simultaneous buying of one currency and selling of another. Over $1.4 trillion dollars, US of forex trading occurs daily and sometimes fortunes are made or lost in this market. The billionaire George Soros has made most of his money in forex trading. Successfully managing your money in forex trading requires an understanding of the bid/ask spread. Simply put the bid ask spread is the difference between the price at which something is offered for sale and the price that it is actually purchased for. For instance, if the ask price is 100 dollars, and the bid is 102 dollars then the difference is two dollars, the spread. Many forex traders trade on margin. Trading on margin is buying and selling assets that are worth more than the money in your account. Since currency exchange rates on any given day are usually less than two percent, forex trading is done with a small margin. To use an example, with a one percent margin a trader can trade up to $250,000 even if he only has $5,000 in his account. This means the trade has leverage of 50 to one. This amount of leverage allows a trader to make good profits very quickly. Of course, with the chance of high profits also comes high risk. Like many other speculative investments, a key part of money management for the forex trader is only using money that can be put at risk. It is wise to set aside a portion of your net worth and make that the only money you use in forex trading. While the chances of good profits are there, if you should have a problem and get wiped out, you'll only have a limited amount of money placed at risk. Also remember that the market is n constant motion. There are always trading opportunities. If a currency is becoming stronger or weaker in relation to other currencies there is always a chance for profit. For instance, if you believe that the Euro is gong to become weak compared to the US dollar then selling Euros is a good bet. If you believe that the dollar is going to become weaker than the yen, or the pound sterling, then selling dollars is wise. Staying current on the news and current events in the countries whose currency you hold is a smart move. Many people reach points where they can predict currency changes based on political or economic news in a given country. Remember though that forex trading is speculation, so be careful when managing your funds and only invest what you can afford to risk. Please always make sure you check with the pros when dealing in this market unless you are doing this as a hobby and don't have a lot at stake in it. There are a lot of big boys playing here and they won't lose much sleep if you and thousands others lose their shirts... by David Mclauchlan Quote Link to comment Share on other sites More sharing options...
shoaybkhan Posted July 29, 2013 Share Posted July 29, 2013 The basic idea behind this saying is that you should first endeavor to manage your risk by using stop losses in a disciplined way. Quote Link to comment Share on other sites More sharing options...
euro Posted October 4, 2013 Share Posted October 4, 2013 One should always manage the money since that will allow you to have some profit for spending and the rest you can then put the rest back into trading. This is ideal so you always have some saving put away. You should not reinvest all of it or else you could lose all of it so tuck some away for a rainy day. I guess when you learn how manage your money you will gain more every day and have some savings. Quote Link to comment Share on other sites More sharing options...
Thayungsta Posted October 4, 2013 Share Posted October 4, 2013 How much can start with Quote Link to comment Share on other sites More sharing options...
euro Posted October 15, 2013 Share Posted October 15, 2013 You can manage by not using all of your money in one trade or with one broker but spread it out evenly to diversify your risks. Also, you should keep some of your profit for a later time to survive on it. As you will not get greedy without seeing how much equity you have. The less equity the better so you don't get all impulsive and greedy over it. Use low capital and leverage to avoid huge losses and use stop loss to prevent losses in long term account. Quote Link to comment Share on other sites More sharing options...
Bagus Posted October 26, 2013 Share Posted October 26, 2013 true what you say that money management one would confuse emotion and emotion than greed is a human instinct, but if we do not control our emotions while trading then we will not be disciplined with our trading strategy and we will fail in our trading. You can manage by not using all of your money in one trade or with one broker but spread it out evenly to diversify your risks. Also, you should keep some of your profit for a later time to survive on it. As you will not get greedy without seeing how much equity you have. The less equity the better so you don't get all impulsive and greedy over it. Use low capital and leverage to avoid huge losses and use stop loss to prevent losses in long term account. Quote Link to comment Share on other sites More sharing options...
surya77 Posted February 8, 2014 Share Posted February 8, 2014 for me it slef is you are forex trader/investor in any trading activity dont forget use stop loss or tradilling stop, becasue this two tools is most important to help you avoid from loss happen. Quote Link to comment Share on other sites More sharing options...
myregister Posted November 11, 2014 Share Posted November 11, 2014 Focusing on your total money, and then calculated how much money can you loss with one position. After that you can divide it into some parts, for example if you want to trade for 20 times and the worst part that you loss 20 times how much you will lose with that one lot. Quote Link to comment Share on other sites More sharing options...
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