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Proper money management is crucial for trading

Posted August 28, 2019 by EasyFinance.com to Finance 1 0

If anyone learns about the trading business, he or she would like to start trading for sure. Because of the fact of big transactions per day, many people get allured into the CFD trading industry. The traders do join the profession with interests. But after getting a glimpse of reality, the traders understand why more than 95% of traders lose their money from the trades. There is no problem with market conditions. Even with the most volatile market condition, many traders are making profits in millions.

Rookie traders turn greedy knowing about big profits. From there, they execute poor trades without having the solid plans for the executions. After the trades are being executed, the traders cannot control the position sizing and end up losing. From time to time, a trader loses a lot of money with poorly executed trades. To keep you safe from a faulty trading career, this article will discuss the key essentials for trading business. You have to read this article properly to learn proper risk management. You must also learn to use the proper stop-loss and take-profit according to the risk exposures.

Define the correct percentage for risk per trade

The first plan a trader need to prepare for, is risk management. All trades needs to be executed based on simple strategy. But not all traders have the idea of proper risk management. They can use the policy of 1% risk management system for every trades. If the traders use this policy for the trades, it would be easy for them to stay calm. To ensure the optimum trading execution, bring the leverage down as well. By using a low leverage you can easily afford multiple loses.

Once you have set the proper risk exposure for the trades, it is necessary to work on a trade setup. The stop-loss will be based on the risk per trade policy. Although the support and resistance zones will help to set a stop-loss, you will need some reference for it. There is no better reference for the potential loss rather than following the 1% rule of money management. Play with a good plan so that, you do not need to worry about the exit strategy. If required use demo trading account so that you can make better at trading.

Start with a small trading account

You might be thinking of reducing the lots and leverage from now on. There is a catalyst which could ruin your plan to invest less in the trades. It is the capital or the trading account balance of which the traders need to worry about. To reduce the risk factors in the trades, it is necessary to reduce the capital of your initial investment. You may have $50,000 to start the trading business but this doesn’t mean you will trade with random strategy. Without knowing the proper trading skills, knowledge and experience, you will lose everything. If you spend time on improving and trade with less capital, it will be much more efficient. Your trading mind will care more for a simple risk management strategy. So, be humble and start your trading career with a very small investment. You can always invest more when the trading edge is improvised with proper skills and strategies.

Learn the right market condition to exit properly

Without proper stop-loss, the traders cannot control their losses. Both stop-loss and take-profit are important to scale the position sizing. But the traders will need a proper market analysis strategy to define a proper setup. You need the supports and resistances zones and the Fibonacci retracement to ensure the best stop-loss and take-profit. Learn more about currency correlation so that you can find the best trading asset. Every trader needs to learn the market conditions properly. You might not be perfect still do not back down from showing effort.

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