How To Manage Your Money When Trading The Forex Markets

Forex trading can be a very rewarding profession because you can start off with a

relatively modest amount of capital and turn it into a considerable amount of money. However it should be pointed out that it's definitely not a get rich scheme.

Of course it is possible to make a lot of money in a short space of time if you use a large amount of leverage and take out a large position or two. However you can do exactly the same at the races or at the roulette wheel. The fact is that forex trading should not be a form of gambling. It's all about taking calculated risks using sensible stakes, and employing a profitable trading system to help you generate winning trades.

Your goal should always be to grow your trading capital slowly and steadily so that in a few years time your account will be showing some considerable growth. This is a lot easier to do and will help you to achieve sustainable long-term wealth without taking unnecessary risks.

Indeed you should forget about using large amounts of leverage because by doing so you are putting a lot of your trading capital at risk. In the worst case scenario you may even be wiped out completely from a single trade that goes against you.

It's a much better idea to use a sensible staking plan. I personally like to risk no more than 3% of my trading capital on any given trade. That way I can easily withstand a few losing trades whilst racking up some decent profits from any winning trades.

This is particularly true if you let your winning trades run for as long as possible. For example you may think that a few losing trades of 3% each time may make a serious dent in your account, but if you let your winning trades run you may achieve gains of up to 5-10% per trade. Therefore your winning trades will more than compensate for your losing ones in the long run.

So the point is that if you are serious about becoming a profitable forex trader, you should manage your money as best as possible. This involves keeping your losses small, using modest stakes of no more than around 3% of your capital per trade, and letting your winning trades run. That way it's a lot easier to generate consistent profits in the long run. All you need is a profitable trading method and some trading capital to get you up and running.

by: James Woolley

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