In an earlier post way back on December 12, 2007, we looked briefly at ways of managing risk in Forex trading. This is really just a small part of the wider subject of money management.
Money management is actually the main thing that separates the unsuccessful Forex trader from the successful one. Yet it's surprising how many traders ignore the idea, thinking it doesn't apply to them! So many people come into Forex thinking that they are going to make the "Big Trade" that's going to seal their fortune. They don't like to be told about discipline, management and caution - it sounds boring.
However, much more common than the "big win" is the "big lose". It's not uncommon for a trader to wipe out a year's profit - or even two or four years' profits - in one disastrous trade. When this happens, it is almost invariably due to loss of discipline and sloppy money management.
The truth is - you CAN succeed in Forex! But don't regard it as a casino where you can stake everything on a big game of chance. Forex trading isn't gambling - if it was, I'd have nothing to do with it! It's a skill you learn, or rather a set of skills, and money management is one of the most important. I honestly don't believe there is a better place to learn the skills of trading Forex than Easy-Forex, with their brilliant tutorial systems.
In the next few posts we will look at money management in more detail - I believe you will be glad we did.
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