Money management strategies

Now you have the strategies, you know how to analyze the market,
you know when to buy, when to sell, and when to exit, you know also
when to stay away from the market.

This is important for you as a trader to know, but you are still missing
the key to the castle. The money management plan.

The most important thing that traders don’t talk about is the money
management. This is what makes a difference between successful
traders and losers.

If you trade without a money management plan, you are just wasting
your time and money. Because nothing is going to work for you, even
if you have the most powerful trading system in the world.

Most traders focus on how to enter the market, they spend months
and years looking for the right system. i don’t want you to think like
them, you should think differently if you want to become a successful

Money management: Position sizing

One of the most important component of money management is
position sizing, what i mean by position sizing is the number of lots you
are risking per trade.

All forex brokers now offer mini lots as the default position size. The
smallest value for a mini lot is approximately 1$.

There are forex brokers that offer 10 cents for a mini lot which
represent an opportunity for traders who don’t have bigger accounts,
they can begin with 250$, and they still have chance to grow it,
When it comes to position sizing, you should think in terms of dollars
instead of pips. Let’s say you are trading 3 mini lots of CAD/USA, this
means you bought or sold 30.000 worth of us dollars.

If the market moves in your favor, you will win an amount of money
equal to 3$ per pip. If you make 20 pips, you would have profited 60$.

Let’s break it down, 1standard lot is worth about 10$ per pip. And
1mini lot is worth about 1$ per pip, and 1 micro lot is equal to 10 cents.

If you open a mini trading account, you should think in term of the
dollars risked instead of pips.

Let’s say you put 50 pips stop loss and 100 pips as a profit target. This
means that if the market hits your stop loss you will lose 50 pips which
is 50$, and if the market hit the profit target, you will win 100$.

The size of your position depends on whether you have a standard or
a mini account, and how many lots you are trading. This information is
important to you because this will help you know how much money you risk on each trade.

The risk to reward ratio

The risk to reward ratio concept is what will make you a winner in the
long run. Before you enter any trade, you have to know how much
money you will win if the market goes in your favour, and how much
money you will lose if the market goes against you.

Don’t never enter a trade in which the profit is less than the amount
of money you risked.

If you will risk 100$ for example, your profit target should be at least
200$, this is a risk to reward ratio of 1:2.

Let’s suppose that you took 10 trades with 1:2 risks to reward ratio. In
every trade you risk 100$.

You won 5trades, and you lost 5 trades. So you will lose 500$.but you
will win the benefits is 500$.

This is the power of the risk to reward ratio, you shouldn’t think that
you have to win all your trades to become a successful trader. If you

can take the advantage of the risk to reward ratio, you will always be

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