Four Essentials for Money Management in Forex

Money management is one of the essentials of Forex trading in the Philippines. It helps one mitigate risk and sustain profits over a longer course of time. When formulating a strategy consistent with the requirements of online trading, it is important to include a plan for risk management as well. This provides traders with the opportunity to make more informed decisions that can guard their profits and improve the financial status of their account. In this article, we’re going to be discussing money management and a few ways to achieve it. 

Refrain from raising risk levels

The first method in accomplishing this would be to keep the risk parameters consistent. In other words, ensure that your position size remains stable even when profits start flowing in. Most traders tend to pump in more capital into a trade when it turns profitable. This is an easy way of having your profits erased in a trade.

The principle that traders tend to follow is to dabble in a higher scale of risk when their trades become more profitable. Contrary to the popular trend, keeping one’s risk consistent can eliminate chances of losses caused by unexpected, sweeping changes in the market. Furthermore, when traders raise their risk levels after a series of wins, they are almost always in an attitude of overconfidence. However, when looking at it from a purely logical standpoint, one would see that there is no reason that one trade would favor you just because the previous one did. Battling the sense of arrogance that comes after wins can help save you loads of money. 

Make regular withdrawals from your account

People who make a living through trading would be used to withdrawing money from their accounts. In other words, they would not hesitate to deplete the money in their account. This is helpful in enforcing the first principle that we had discussed – not raising risk. Withdrawing money from your account helps to psychologically regulate one’s appetite for risk-taking. A trader who regularly withdraws money would be unlikely to inflate the risks associated with that very account.

Avoid moving the stop-loss to the break-even zone

The only instance when one should move his stop loss to the point of break-even is when there is a rationale based on the price movement to support it. If not, tightening this order could potentially turn the transaction into a losing one. 

Understand when to allow a profit to go on

Being able to predict the range of a market is instrumental in letting a trade go on during a fertile market period. There are rare instances when the market would be moving in a favorable direction for much longer than you intended, and being able to identify these areas is crucial to making large profits. When being able to foresee such a time, you need to restrain your fear and let the trade go on. 

These are some of the ways money management can help one improve profits. If you need more guidance on the area of money management, then team up with the reputed Forex brokers to forge your path. WesternFX is among the best names in this space, with a presence across multiple countries. Join us to upgrade your game and master online trading in the Philippines.