While money management is mainly used in wealth management, it is also an essential technique in the field of trading. Indeed, when it comes to investment, there must always be a management side. Capital management, risk management… money management is now available to all Forex traders, individuals and professionals.
Why money management?
When opening a position on the market, the trader becomes a full-fledged investor and must manage his investment so as not to ruin himself. Already, it is necessary to manage the volume to be placed in a trade in relation to the available capital. Do not take unreasonable risks, but act only in accordance with market conditions. The main objective of money management is to eliminate large and free losses, but also and above all to maximize the return on each investment. Indeed, blind gambling has no place in trading and it is necessary to have a good foundation to win. Unfortunately, many traders are not used to applying good financial management, but simply place and wait for prices to move. And yet, it is perfectly possible to better control both risks and gains, before and during a trading session.
How to apply it in Forex?
In fact, money management must be an integral part of the trading strategy. Taking into account several elements, management remains one of the keys to increasing returns and minimizing losses. The data collected makes it possible to make the right bet from the start and, during trading, to react according to market trends. When there is a capital fluctuation, an adjustment in the size of the positions may, among other things, be useful as appropriate. Brokers such as AvaTrade for Forex or BDSwiss for binary options offer advice on how to better manage your capital. money management takes into account the trading technique applied and allows you to determine the right times to act, but also the volumes to invest. This management, which aims to determine the amount of risk and maximize results, also takes into account the maximum loss allowed per position (stoploss), as well as the profit objective for each stake (take profit). In short, it is about considering all the elements that can influence the results and making decisions accordingly, while following a well-defined trading plan from the beginning. start trading Forex with Avatrade or binary options with BDSwiss