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Saturday, December 24, 2016

Money And Risk Management

How to save yourself from huge amount money-losing

On the very beginning of our story, we are talking about MONEY AND RISK MANAGEMENT. It is not by mistake written down in big letters. We only want to highlight the importance of this post. First, you must know how to save your money which you have in your pocket, wallet. It is crucial. Why is it so important and why we are talking so much about it. Many of us have heard the story about two newbies traders. They have had all information and tools to make decisions how Forex trends should go. They wherein separate rooms, and after awhile they ended their adventure in Forex trading, unfortunately, without any money.
In same time two experienced traders, wherein one other room and they were directed to trade in opposite directions. It is usually, for newbies to expect that one must win other to loose money. In this case, the story is complicated and now less understandable. Both of them are winners! Why? This question is the question which Forex newbies often repeat.
The crucial thing here is to save capital which is in your pocket. What is so important here? Look at some examples.
We are going to explain it with some data in the table below. The second column shows money which some potential Forex trader loose and third one shows money amount which the same Forex trader needs to win if he wants to have an as same money amount as before trading.
Losses Recovery Wins
1 1 1,01%
2 2 2,04%
3 3 3,09%
4 5 5,26%
5 10 11,11%
6 20 25,00%
7 30 42,86%
8 50 100,00%
9 70 233,33%
10 80 400,00%

The table talks so much. The first example shows us: if someone loses 1% of capital, needs to win some more than 1% of the money. It is less than a usual amount which Forex traders win in their transactions. The second one shows that if someone loses 2% of his money he needs to win 2.04% of his available capital. It is not so much. Let's see greater losses. If someone loses 10% of his capital he needs to win 11.11% of his available capital if win he would have as much money as before losses. To win so much money, you need more skills and not to lose no one more time yet. Let's look at 500% losses. Someone who loses 50% of his capital needs to win 100% of his available capital! It is soo much money and if he does not lose any more money he is a very lucky man or very skilled. Let's look at the last one example. Someone newbies in Forex trading losses 80% of his capital he needs to win nothing less than 400% of his available capital. There is nobody who can say, maybe some little of them, it is impossible to recover from this situation ever. Alternatively, on the list, he needs very, very much patience and of course lucky and skills to do that. In reality, it is never. However, do not give up! Ever do not say never! You must have this in your mind ever. A big number of traders knows this story it is not our fiction. However, when some traders start to wind they give himself the freedom to forget about this and often almost lose all capital spent in Forex trading and wich was collected many years.

How to solve this?

Money and risk management, forex trading, do forex
Money and risk management
The solution is very easy. You must regularly set stopping loses. Always! Money and risk management is crucial! There is no exception in this. What it is we'll explain in other articles. Only what we say now is, it is something that every trading platform has. The trading platform is the tool for online Forex trading. There is some advises which maximum amount of capital you need to put at risk setting a position. For beginners, the most acceptable is, do not risk more than 1% of your money! Do not forget it in any situation! Do not think: OK; I will this time do differently than they say in the advice; I need to make more money or to save yourself from current losing. If your prediction of trend moving was wrong, then you can not correct it by moving stop loss. Do not try it. There is a story that someone who played cards for money was not lost so much money because he played cards for money, but it was because he wanted himself recover from his losses. So the result was much worse than that he gave up on time. Another question which we want to discuss is: What amount of money I need to put in my Forex account to be a more successful trader. The answer is not simple. From the point of view, of Forex trading, much more money in your account represents greater security and provides increased opportunities for trading. However, always keep in mind that all the money from the account you can lose in the worst case in only one bad transaction, which is the case if you do not set the stop loss. The advice is the following: to train yourself on demo accounts, and when you gain enough experience, this dilemma for you will not as difficult as it is now. The amount of money invested in the Forex account must be less than the sum of money that can endanger your family. In previous text: Forex Investing, we are discussing problems close to Forex investing.

Where to Go From Here

Start of the Forex Course: Do Forex
Previous text: Forex Investing
Back to top: Money and risk management
To be continued...