As you probably know, a key secret to successful Forex trading is money management. However, most traders, especially new ones, experience a problem. This is why experienced traders, that is those that have survived, consistently indicate, solid rules on money management is a key to successful Forex trading. Forex is not new. It has been making people rich for decades.
Then why do so many new traders lose their money? How can you prevent these loses? Strangely enough a good trading system or strategy is only part of the answer. Successful traders use good money management and broke former traders use poor management.
One of the key rules is never risk more than 5% of your account on any one trade. This is not rocket science. This basic rule applies to Forex, futures, stocks, commodities and options. Then why do so many Forex traders, new traders mainly, not follow this basic rule? Lack of discipline, emotional trading, wanting the big score and impatience are a few of the reasons. Most Forex trading systems that you can purchase have money management as a core part of the system. If it does not, get your money back and find another system. Some believe, for manual systems, financial management may be as much as 80% of the Forex trading plan.
Money management is the difference between gambling at Forex and trading like a business. Proper management can make your trading system more profitable. A rapidly growing area in Forex is automated trading software. Why? There are a number of reasons, not the least of which is that money management is built into the better Forex robots. Additionally, many other trading parameters are built into the robot.
With an automated Forex trading robot, trades are made under strict guidelines and the robot does not enter or exit a trade based on a whim or feeling. Plus, based on the criteria that you set, with money management built into the Forex robot it will not place a trade that is to large for your account. Are you beginning to see the simplicity and security of making money in Forex?