Regulator : asic

Top 10 money management tips for Forex trading

Top 10 money management tips for Forex trading

There are too many traders whose losses are much greater than their profits. They are often either inexperienced or do not trading seriously and, therefore, do not learn from their mistakes. Everyone can improve their trading skills with an arsenal of tips and guides which are available online or provided directly by their broker.

The major thing to know is that profitability of trading is strongly associated with the trader's financial health. Proper money management is a significant contribution to one's financial health and one's ability to turn losses into gains.

There are some basic money management tips for Forex trading that everyone should take into account. Condensed, they look the following way: manage your risks, stay organised, and learn and improve your skills.

This is usually the kind of wisdom that comes with experience, and the latter assumes lots of trials and errors. There is always a chance of avoiding serious mistakes through following more experienced professionals' advice. They will not 100% guard aspiring traders from losses, but will contribute to maintaining of the overall financial health.

Demo Account

10 useful money management tips for traders

Seasoned traders can tell a lot about how to trade and even more about how to manage one's own money. There are lessons that cannot be forgotten, and money-related lessons are always among them.

Below are the most popular 10 Forex money management tips which were kindly provided by experienced Forex traders. Follow them alongside your strategy and get ready for improvements.

1. Know where your money ends

While your secret – or not so secret – wish might be to gain as much profitable as possible in a very short time, you should hold on to your realistic expectations and keep on trading. You can trade all the way you want, but remember that you should be careful with your money.

Basically, no money equals no trading.

Some of the popular money management tips for Forex trading include avoiding risks that involve over 3% of your capital (which, in its turn, should be enough for 40 trades). This is something to remember, especially if you are new in the trading game.

2. Trade with your risk capital

Trading always involves taking risks. Make sure that you are not risking the money you normally spend on rent, food, or even traveling. It would be a catastrophe if you don't make enough profitable trades to cover the losses of your primary financial resources.

That's why traders have a special amount of money they are willing to invest in trading particularly, risk capital. This should be the amount you are ready to say goodbye to in case your trading rounds turn out unsuccessful.

3. Don't forget about stop-loss orders

Stop-loss orders have always been useful to traders. Often, trading is associated with high emotions where rationality suddenly becomes absent. Whenever we are losing, we often still have hope that the situation improves, and the stock grows in value someday. However, it is better to protect yourself from even bigger losses, and putting in a stop-loss order will help you do that. Secure your capital with stop-losses, and move on to the next Forex money management tips.

4. Never underestimate leverage

Leverage helps traders to try out their abilities and strategies in real market conditions by trading with more capital than they actually have. However, if you are losing, it might be very painful for your budget with a leverage. That's why you should treat it with caution and respect: be grateful for opportunities you have thanks to it, but never overuse it.

5. Practice self-control

As it's already been mentioned above, Forex trading is associated with strong emotions. It is very easy to find yourself overwhelmed whenever the price rises unexpectedly or falls rapidly, no matter if you are a buyer or seller. Whenever you are profiting, you must feel elated, and when you are losing, you might feel devastated. Filled with emotions, we often make irrational decisions without weighing all pros and cons.

In a business where planning and strategic thinking decide the outcome, acting emotionally is usually very harmful. Get a grip of yourself and use your intellect, never emotions. Expand your knowledge and learn actively: the more you know about different situations that might occur in trading, the less emotionally you perceive them.

6. Any outcome should be accepted

One of the most essential Forex money management tips is to be ready to accept losses, as risks are a part of the trader's routine. It is very nice when you are hoping for a successful trade, but try to be realistic — losses are inevitable at some stage. Even if you are making profit for a significant number of trades in a row, a moment might come when you lose. So, stick to your strategy and do everything you can to avoid failures, but get prepared to accept any outcome.

7. Do not trade excessively & manage risks

There are no Forex money management tips without risk-management. Evaluate the risks and invest the amount of money you based on this assessment. Analytical thinking and planning are the two strongest skills of every trader. Without using them non-stop, you never know how the outcome of the next trade is going to affect you. Also, no matter what the result is, do not trade to excess. This will help you save your earnings and escape greater losses.

8. Adjust the position size

Do it whenever you are going to make a trade. You can do that by using a special position size calculator (it is available with your trading software or can be found online) or by calculating it on your own. Adjust your charts according to your strategy and move along with your plan. Keep an eye out for an edge: if you don't see it, don't take any actions.

9. Do not nurture unrealistic expectations and keep it real

It is essential to stay updated on the market and the sentiment around it. You should stay in touch with other traders and listen to what they have to say. Also, subscribe to the financial news and follow them always. It will help you be aware of the possible changes in the market. If you make sure to stick to this Forex money management tip, you'll become closer to the profit you're hoping for.

10. Cut on the cost-consuming activities

The last one of the Forex money management tips concerns the actual saving. Learn to value your money and not to spend it on unnecessary activities. What can be those? Just any trading activities that lead to losses, actually or potentially. Instead, try to invest more in those activities which result in financial gains.

Apply the Forex money management tips to your trading strategy

There is so much literature available that is dedicated to trading, the strategies, tools, and secrets. All you need to do is to go and learn. Theoretical information alone will not make a trader of anyone; you should apply the theory into practice and implement it in your strategy. You will find tips like the ones in this article extremely helpful only if you use them in day-to-day trading.

As soon as you let things run on their own, you might lose control of your finances. Don't let this happen: study the strategies, stick to your own, and use the Forex money managing tips designed and tested by experienced traders.

Start Trading

Final thoughts

It is important to emphasise one more the importance of money management in trading. This kind of activity is related to one of the most unpredictable things, the currency market.

It is natural that, as an aspiring trader, you will experience more losses than gains until you master your strategy to perfection and form a pattern for making entries and exits. This takes a lot of practice.

So, let the management tips for Forex trading become a part of your trader's consciousness and your trading routine, which will help you to be more protected from all the financial risks out there.

Admiral Markets Group consists of the following firms:
Admiral Markets Pty Ltd
Regulated by the Australian Securities and Investments Commission (ASIC)
  • Leverage up to:
    1:500 for retail clients
  • Volatility protection
  • Negative Account Balance Policy
Note: If you close this window without choosing a firm, you agree to proceed under the FCA (UK) regulation.
Note: If you close this window without choosing a firm, you agree to proceed under the FCA (UK) regulation.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.