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Moneymanagement

Forex: Money Management MattersForex: Money Management Matters Forex trading management is of paramount importance. Currency trading is not a game of chance, so a trader can and should control risk, monitor cash flow, and regularly review their strategies. In forex trading, where prices change rapidly, money management becomes the most useful tool. This FXOpen article discusses some popular forex money management strategies you need to know about. What Is Money Management in Forex? Forex money management refers to a set of principles, strategies, and techniques used by traders to effectively manage capital when working on the foreign exchange market. Money management in trading is interconnected with risk management. Money management for traders is not just about preserving your capital; it’s about the possibility to maximise your returns and minimise risks. It’s the framework that separates successful traders from the rest. Money Management in Trading Without money and risk management, a trader is like a sailor navigating dangerous waters without a compass. To help you find a way to preserve capital, below there’s a list of the most widely used strategies. Calculating Position Sizes One of the most popular forex money management strategies is determining position sizes. This involves sizing each trade according to your trading capital and risk tolerance. It helps ensure that a single losing trade does not significantly drain your trading account. Let’s take a look at the most common methods. Fixed lot sizes. With this approach, you trade a set number of lots or units for every position. This provides consistency, as each trade carries the same position size. Fixed lot sizes also allow for precise control over the monetary risk. However, this model may not adapt well to changes in market conditions and your capital. Percentage-based position sizing. This approach allows you to adjust your position size depending on the size of your trading account or the amount you are willing to risk on each trade. The position size can grow with the account and shrink during drawdowns. This helps you maintain a constant level of risk in different trades. However, the calculations require more mathematical effort than with fixed lot sizes. Volatility-based position sizing. Here, the size of positions is adjusted depending on the level of volatility in the market. If volatility is high, a trader might trade smaller positions, and if it is low, a trader might trade larger positions. This model aims to limit risk during times of elevated market uncertainty. However, the approach is complex and requires the monitoring and analysis of market changes. Risk-based position sizing models. Such models are designed to match the position size to your defined risk tolerance. You specify the maximum amount you are willing to risk on a trade, and the model calculates the position size accordingly. This approach prevents trades from having a disproportionate impact on the overall account balance. However, in risk-based models, the position size may not adapt to different levels of market volatility. Setting Stop-Loss Orders A stop-loss order is a predefined price level at which you decide to exit a trade. It helps you maintain discipline and avoid emotionally driven decisions. By setting a stop-loss order, you protect your trading capital — it acts as a safety net, ensuring that you don’t incur losses beyond the predetermined level. Placing stop-loss orders at the right levels is a skill that can significantly impact trading results. Here are some techniques: 1. You can use technical analysis tools , such as support and resistance levels, trend lines, and chart patterns, to identify logical places for stop-loss orders. 2. You can adjust your stop-loss levels based on the volatility of the currency pair you’re trading. In highly volatile markets, wider stops help to account for price fluctuations, while in calmer markets, tighter stops may be appropriate. 3. You can analyse multiple time frames to gain a comprehensive view of the market. This helps identify both short-term and long-term support and resistance levels for placing stop-loss orders. 4. You can consider using trailing stop-loss orders , which automatically adjust as the trade moves in your favour. They allow you to lock in profits while letting a winning trade run, reducing the risk of prematurely exiting a profitable trade. Thanks to technical advancement, there are now many online tools that can help you in trading. For example, using a forex true money management calculator, traders can accurately determine their position sizes and risk levels and enhance their trading strategies. Diversifying Assets In forex, diversification is a key money management strategy that involves spreading your investments across different currency pairs. The goal is to reduce the impact of a poor-performing asset on your overall portfolio and increase the chances of achieving consistent returns. Traders combine major, minor, and exotic currency pairs to spread risk. Majors are known for their liquidity and stability, while minors and exotics often offer unique opportunities. You can also explore other asset classes, for instance, stocks, indices, cryptocurrencies*, or commodities and trade their CFDs at FXOpen. Analysing Correlation Understanding how different assets are correlated with one another is crucial for effective diversification. Asset correlations indicate how two or more assets move against each other. There are positive and negative correlations. - A positive correlation is when two assets move in the same direction. For example, if EUR/USD and GBP/USD have a positive correlation, they tend to move up and down together. - A negative correlation is when two assets move in opposite directions. If USD/JPY and AUD/CAD have a negative correlation, when USD/JPY rises, AUD/CAD tends to fall, and vice versa. Correlation coefficients range from -1 to 1, indicating the strength and direction of correlation. It’s a good idea to use historical data and statistical tools to measure correlations between currency pairs and other assets. On the TickTrader platform, you can find useful charts with historical currency pair quotes. Final Thoughts Your performance in the forex market is not only determined by forecasting price movements. It largely depends on the ability to manage money, reduce risks, and preserve capital. By applying the strategies and principles discussed above, you will be able to confidently and competently navigate the forex market. You can open an FXOpen account to test these strategies and techniques. *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
2
Is It normal for your wallet to be in red despite recent pumps ?Are you wondering why your wallet is still showing losses even though many cryptocurrencies have seen recent gains, like BINANCE:BTCUSDT up 20%, BINANCE:AVAXUSDT 23%, BINANCE:XTZUSDT 26%, and BINANCE:BOMEUSDT 43% ? It might seem like a simple question with straightforward answers such as " I didn’t buy at the bottom " or " I bought at the top ". Others might say, " Even if I'm at a loss, I’m holding for the long term " While these statements can be true, the key is to understand whether your portfolio is experiencing a " healthy red " or not. Case 1: You Bought at the 2022 Bottom but Your Wallet Is Still in Red If you bought during the 2022 market bottom, it’s unlikely your wallet would be in the red after the recent corrections. If it is, the loss is probably small since most coins are still near their bottom. A small loss in this case is considered a " healthy loss ". However, if your wallet shows more than a 10% loss, the projects you invested in might not have been the best choices. You may have picked coins with a small investor base , a weak community , or poor project fundamentals . How to React: In this scenario, I might want to reconsider my investment choices. As soon as your coins make even a small 1% profit, I will consider reducing my exposure to these "small community " or " poor project " coins. Case 2: You Bought During the March 2024 Pumps If you bought during the March 2024 pumps, you might have acted out of fear of missing out (FOMO). You saw the strong pumps and jumped in, only to now experience harsh corrections, with your wallet showing a 50% or more loss. This is a sign of an " unhealthy wallet ". How to React: If you find yourself in this situation, you have two options: Strong Project : If the project is strong and has a large number of holders, I will consider lowering my entry price and holding until the next altcoin pumps. I will reduce my exposure as soon as I start seeing profits. Weak Project : If the project is weak, it might be a losing investment. In this case, I may might want to leave it in the market. If it eventually gives me small profits, I will consider selling. Case 3: You Bought During the August 5th Crash If you bought during the August 5th crash and your wallet is still in red despite the recent pumps, it could be a cause for concern . I will check if the project has received any bad news or if it’s still adding supply to the market, which could be diluting the impact of the pumps. Final Thoughts Seeing your wallet in red can be frustrating, but it often comes down to a lack of proper money management. Before entering any investment in the crypto market, it’s crucial to create a roadmap for your portfolio. Without a clear plan, you might end up buying at the top and selling at the bottom out of fear or the hope of buying in lower later. These are bad habits that can hurt your long-term success.
BITSTAMP:BTCUSDEducation
by Monstralian
When to PAUSE Trading – NOT Stop – 4 TimesThere is a time where you might need to PAUSE with your trading. It will save you from a potential portfolio crash. And it happens either when – The market environment isn’t playing nice with your system. And there are moments when you need to step back from your trading. But even when you halt trading, it doesn’t mean you can just take a vacation and chill. No! The key is to track your performance each day, until the conditions improve. This will make sure, you’re poised to leap back in when the time is right. Let’s dive into the signs that it might be time to hit the pause button. Big Drawdowns Over 20% Picture this: Your portfolio is sliding, and suddenly, you’re staring at a 20% drawdown. It’s VERY rare – and I haven’t seen such downside since I started trading. But this applies to new traders who try to do too many things at once. Anyways, 20% is Ouch. If this ever happens, it’s a signal to halt trading and reassess. Then you’ll need to analyze and see what is going wrong. See if there is a flaw in your system. See if the market is the right one to trade your system with. Is it a market anomaly or is it psychological where you keep making silly mistakes. Remember, it’s about surviving to trade another day. Feeling Very Emotional with Trading Losses Trading is a game of numbers, not emotions. Now losses do sting. But that’s only when the risk is too high or you’re psychologically unable to handle them. The trick is to manage emotions and take countless trades (wins and losses), to lower the effect of the losses. But, if you find yourself riding an emotional rollercoaster with every loss, it’s time to halt. Trading with a cloudy mind, over emotions and fear is a recipe for disaster. Emotions can lead you to take impulsive and revenge trades. And this will lead to EVEN bigger losses. So, take a breather. Step away from the screens and give yourself time to cool off. Recenter your focus until you feel you have a clear, rational mindset for trading. A trader who controls their emotions controls their destiny. No Confirmed Strategy Trading without a plan is like navigating a minefield blind. If you’re unsure about your strategy or it’s not delivering consistent results, halt. Spend time to refine and optimise your approach. Backtest, analyze, and validate your strategy until you’re confident it can withstand the market’s ups and downs. Only then should you resume trading LIVE. A solid strategy is your roadmap to success. Do Not Trust Trading Trust is the cornerstone of trading. If you find yourself doubting the entire process, it’s a red flag. Maybe it’s because of repeated losses, unreliable signals, or just plain bad luck. Whatever the reason, if you don’t trust your trading, halt. You will manifest a very negative outlook on what trading can help generate you during your career. Remember trading is all about probabilities, risk and reward. Use this time to rebuild your confidence. Educate yourself, seek mentorship, and engage with the trading community. Trust isn’t rebuilt overnight, but with patience and perseverance, you’ll get there. Once you regain your trust, you’ll trade with renewed vigor and clarity. FINAL WORDS: The Power of the Pause Hitting the pause button isn’t a sign of weakness. It’s a powerful strategic move to know when something is NOT working. When you HALT trading you recognize when you need to protect your capital, preserve your mental health, and prepare for a stronger comeback. Always track your performance and be ready to adapt. Remember, the market isn’t going anywhere, and neither should you—just be smarter about your approach. Let’s sum up the times when you should HALT trading. Big Drawdowns Over 20%: Pause to reassess and prevent deeper losses. Feeling Very Emotional with Trading Losses: Step back to cool off and regain a clear mindset. No Confirmed Strategy: Refine and validate your approach before resuming. Do Not Trust Trading: Rebuild your confidence and trust in the process.
JSE:J200Education
by Timonrosso
2
Compound Interest - A Trader's Secret WeaponIn this video I give you a perspective that traders often neglect - Compound Interest. Compounding is probably the most important part in terms of becoming a trader that survives in the long run. Social media is filled with traders nowadays, and some of them are pretty good at trading. However, shortsightedness gets to them as they forget about the one thing that ensures longevity in this game. It is way easier dig yourself into drawdown than it is increase your wealth, it is just math. The technique that greatly rewards the disciplined and patient trader is COMPOUNDING. As Albert Einstein said according to some sources although not verified is that "Compound interest is the 8th wonder of the world". - R2F
Education
by Road_2_Funded
TYPES OF MARKET ANALYSIS1) Fundamental analysis. fundamental analysis focus mainly on micro and macro event that will control market situations in the present and in the future. it includes various events in economic calendar like PPI CPI NonFarm Payroll, Interest rate decisions, and geopolitical senarios like election war climate issues etc 2) Technical analysis. Technical analysis mainly focus on indicators chart analysis volume analysis, various analysis like following candle stick pattern, trading strategies based on indicators 3) Market sentiments Market sentiments focus mainly on how the crowd anticipate wheich direction will market go, like when xauusd reached at its all time top everyone believed it will have a retracement from that zone like share and follow us for more such informative contents
Education
by realmillionairefx
Premium Crypto idea $$$$ #ENSUSDTENSUSDT is facing resistance, indicating a potential selling opportunity for day traders. The price has failed to break above this level, suggesting a reversal may be imminent. The overbought conditions on the RSI further support the idea of a short-term price decline. Day traders may consider selling ENSUSDT to profit from this potential downside movement. It is important to set appropriate stop-loss levels to manage risk effectively. Entry: 14.786 SL: 14.885 Target 1: 14.426 Like share and comment for more Click the follow button #crypto #daytrading #signal #analysis #moneymanagement Trade God out
by TradeGod003
1
Next Premium Gold idea $$$$Gold is currently facing resistance at key levels, making it challenging for prices to push higher. Factors such as a strong US dollar, rising interest rates, easing geopolitical tensions, and bearish technical indicators have all contributed to the pressure. While the long-term outlook for gold remains positive, the current resistance zone suggests that the metal may struggle to break out in the near term. Investors should closely monitor price action to determine if gold can overcome this resistance and resume its upward trajectory. Entry: 2322.64 SL: 2331.18 TP1: 2312.15 #xuausd #gold #signal #analysis #daytrading #forex #pips Like share and comment Trade God out
OANDA:XAUUSD
by TradeGod003
1
CAKE Basic trend. Working with reversal zones. Money management.Logarithm. Time frame 1 week. Major trend. Combined education and potential trade in ideas. Pivot zones from key liquidity zones. The main idea and meaning of this idea is to show the logic of working with reversal zones from key resistance support levels, which will determine the further development of the trend. I have shown all possible scenarios of secondary trend development from more probable and logical to less probable, but which have the right to be realized. You should always keep even unlikely scenarios in your mind, even if you do not believe in them. Few people calculate different variants of trend development ahead of time. In most, as a rule, there is one scenario of price movement, but it is built in most cases on the desire that it was exactly as profitable. This is how this trend looks like on a line chart. Exchanges and surprises. Money management. CAKE (PancakeSwap) is a decentralized exchange (DEX) token on the Binance Smart Chain, launched by anonymous developers The coin as an example of similar crypto of the third liquidity group, which lose capitalization, that is, people's faith in the project itself - "the faith of the community is killed". It is quite possible that at one moment the faith in anonymous developers will be "killed" and they will use the existing liquidity for the last time. I emphasize what blockchain the token is made on and how many bad triggers (FUD and not only) in the info space, not only with the designation “4”. The idea (long-term trend) is more educational than trading because of the degree of risk (liquidity, “ugly chart” for the future, large depreciation, breaking a long horizontal channel at a very large %). My desire is to trace on a live chart how the fate of two exchanges will be reflected on the price of this token in the future. Liquid, popular, reliable and conditionally decentralized with “anonymous developers”. Local trend. Work in it (only in it and nothing else). Risk Management. But, in the local trend at the moment, this coin is interesting to work, especially since the triangle is almost formed and soon the dénouement. Stops will be quite short in the direction of the breakout, that is work. I will post an idea for local-medium term work below. Take a local profit (maybe substantial) and forget once and for all about crypto fantasies and what will happen to the price next. No regrets if you took a relatively small profit and further development of the trend showed an order of magnitude more. In the end, it may be the other way around, you will be the lucky one who “made it” before the “sunset”. Learn to take profit from the market, it is better to take a little bit at a time, limiting risks, than to take a potentially large profit (which is what most “sectarians” are waiting for). In the long run, I highly recommend not getting involved with this or other similar cryptocurrencies. You will be playing casino, and not so much with risk management (risk/profit ratio in trading) but with money management (money management in general, places to store and trade). So stops can be useless in some not quite trading situations. Note how I've written a lot of information that doesn't really apply to this cryptocurrency directly, but only indirectly, as a potential consequence of more global yet equally potential events . Observe money management and risk management in trading, diversify where you trade and store crypto assets, this will guarantee a sound sleep in the future. . Secondary trend + local work. Time frame 3 days. 08 2023
by SpartaBTC
12
The final few liquidity grabs before the big dropBitcoin will not be seeing 45,000 any time soon as this “bullish” move has extinguished. Bitcoin’s all time highs are usually parabolic and unusually unpredictable but this chart reads clear as day that the trend formed has a limit. Rejecting off of key levels with volume supporting the move down, big money is opening positions below 44,000 and the vol oscillator on the daily is sustaining that move. There’s no major money being put on above 44,000, which is why we’re seeing a small grind up and prices oscillating between ranges. All of this combined is confirming a bearish consolidation. On the fundamentals side, Bitcoin is suffering from an extreme case of greed much like the stock market. It’s getting to a point where anything opposite of bull is met with difficulty. This kind of psychology is ripe for manipulation and rug pulls. Just the other day, I saw advertisements on YouTube of professional Bitcoin related businesses telling people to buy it. I don’t even search for Bitcoin related news on YouTube or Google so this is also what’s setting the alarm bells off. I don’t believe in fundamentals too much but I trade what I see on the technicals and it’s not looking good for longs, so I’m going to wait to get in. I don’t know how long it’ll take to get to my target but from mid 20,000 to 30,000 I see this reaching before any meaningful support with volume.
BITFINEX:BTCUSDShort
by MMinutes
3
AUDUSD-Money managementHi friends, After the previous signal reached all the set targets, today I would like to share my opinion about money management and how to manage open positions. In my opinion, in the first 2 years of trading on each position, a maximum of 3 to 5% of the total account balance should be involved. Second, convert the money into several parts for a signal or one idea, for example, Two or three to 0.01 lot. Risk-Free: The important thing is when to do risk free? For do Risk-Free (change the stop loss to the entry point) after the price reaches 50% of the forecast or primary idea. For this trade, I risk-freed after the price reached TP2.
by Ario_trader
3 Risk Actions to take in a Sideways Market “Do you have any risk or money management rules you take, during a Sideways Market or Twilight phase? I want to be more cautious with my trading.” These actions, no doubt, will help us protect and preserve our trading accounts. Action #1: Drop your risk even more If you’re feeling uneasy with the markets, as many have – drop your risk. You can even drop your risk to a range of 0.5% to 1% per trade, as opposed to the usual 2%. This will keep you in the game, so you don’t miss out on any moves. Action #2: Hegde your portfolios I consistently employ hedging strategies, both Longs and Shorts. For example, you can go long stocks and short gold as a hedge. Or you can go long Bitcoin and short Ethereum as a hedge. As long as your losses are smaller than your winners, then your winners will outweigh. And this will help keep your portfolio in check. Action #3: Diversify The JSE ALSI 40 isn’t the be all and end all of trading. You need to learn to diversify into other markets. I’m talking about Forex like EUR/USD, Indices, and even intraday trades.
TVC:SA40Education
by Timonrosso
SQ goin up. As you can see here, we are coming up on a demand zone area from back in March 2020. We are touching the bottom line of the Bollinger bands and the bands are opening up meaning there could be volatility for a big move. We are also oversold on the RSI as well. I would wait for a big move off of the band with high volume and target the upper Bollinger band. The analyst on TradingView and most of the recent ideas on here suggest we are going to make a reversal soon.
NYSE:XYZLong
by OptionsMastery
IMPORTANT - 14 Risk and Money Management RulesOver the past 20+ years, I've only mentioned a few money management rules. But then I thought about it, and realised there are so many more I use when I trade. So with this TradingView platform, I’m going to share my 14 most essential risk management rules I’ve ever come across. RULE #1: The 2% Rule – Limit Your Risk You might have seen this risk rule from me before, but there are new TradingView members everyday. Here’s how it works… Never risk more than 2% of your total trading capital on a single trade. No matter how good the trade looks, this rule will help you safeguard your portfolio from the impact of a single trade's outcome. The reason is, you will enter a losing streak. You will most likely take from five to seven losing trading in a row. But with the 2% rule, you’ll only be down 10% to 14% of your portfolio compared to if you risked 5% to 10% per trade. RULE #2: The Probability Rule – Assess Trades When you buy or sell trades, there are three types that can line up according to your trading strategy. I like to categorise these trades as. High, medium, or low probability. For high, medium, and low probability trades, risk 2%, 1.5%, and 1% of your portfolio respectively. If my trading criteria matches all the right elements to buy or sell – this is considered a high probability trade. That’s where I will risk 2% of my portfolio per trade. If my trading criteria has one or two elements that are showing conflicting signals – this will be considered a medium probability trade. In this case, I’ll only risk 1.5% of my portfolio. Other cases, there’ll be a time where the system will line up but the market environment is in a choppy and volatile range. This is where the trade will be a low probability trade. And so, I’ll only risk 1% of my portfolio per trade. Identify the probabilities and you’ll be able to adjust your risk accordingly. RULE #3: 20% Drawdown Rule – Pause After Losses There could be a time, where your portfolio is in the slums. This is where you could be down 14% to 20% of your portfolio. What then? Well you need to protect your capital. I have a simple rule where, once my portfolio is down 20% of my portfolio – I will pause my trading. During a drawdown, I’ll then switch to paper trading until conditions improve. If the market resumes in favourable territory and I feel more confident that the system will work better – I’ll then resume trading with 1% risk. RULE #4: Never Risk Unaffordable Money This one is a given, and one I often preach. With trading you should NEVER risk any money you can’t afford. If you’re using your only savings from retirement or you have any money that you’ll be emotionally attached to - Avoid trading all together. This is not only dangerous for your financial situation but it will also lead to a rollercoaster of emotions trading during both winning and losing streaks. RULE #5: The Time Stop-Loss Rule – Time-Based Limits If a trade doesn't meet its profit target (or hits the stop loss) within a specific timeframe, close it. I have a 7 week (35 business days) rule. It doesn’t matter when, what level or if the trade is in the money or out the money. You want to close the trade, after a certain period of time has elapsed, for three reasons. 1. You’re a short-term trader and don’t want to turn it into a long term investment 2. There are costs you are paying daily which is leading you to incurring a higher loss or less profits. 3. You don’t want to feel married to any specific trade. Either you’ll bank a lower loss than you planned. Or you will bank a lower profit than planned. This prevents capital from being tied up in stagnant trades. RULE #6: The Trailing 1:1 Rule – Protect Profits This rule, will help you secure your profits when a trade is moving in your favour. Here’s how it works. Once a trade hits a 1:1 risk-reward ratio (and has moved in my favour). It gives the opportunity to move the stop loss up to just above break even. This way you’ll will bank a minimum gain, should the trade turn against you. Also, it will increase your win rate and emotionally you’ll feel it’s much easier to hold a trade with nothing to lose. RULE #7: Half Off Rule – Secure Gains Sometimes, you don’t want to move your stop loss. Instead you want to lock in profits, while the market is moving in your favour. So the rule is simple. When the trade reaches the risk to reward of 1:1, this might be the best time to close half your position. This will lock in some profits while leaving room for further gains. RULE #8: The 5% Margin Rule – Control Leverage This rule is more applicable to those who have a MUCH larger account of R25,000 and up. Remember, with trading you’re buying and selling on margin. If the gearing is 10 times this means if I hold 1% of my account, I am risking 10% of my portfolio if the trade heads to zero. So, the trick is to never risk more than 5% of your account on a single trade. This approach reduces exposure to risk and aids risk tracking in volatile markets. RULE #9: The Intraday Stop Rule – Daily Loss Limit Not all traders like to hold overnight. You get intraday traders who buy and sell trades within the day. If you are one of them, then this rule is for you. Make sure you set a daily loss limit or a maximum number of losses. For example, if you’re down 3 to 4 trades in the day – that might be your que to stop trading for the day. There are a few reasons for this including: • The market environment is not conducive to continue. • You need to protect your capital. • Your emotions might run out of control having taken too many losses in a day. • This could result in impulsive and revenge trading to try make up for your losers. RULE #10: Forex NEWS Rule – Avoid High-Impact News Events I mentioned this in the last Trading Tips Q&A, but I’ll say it again. If you’re a Forex trader and you want to avoid volatile times when certain news events come out. You can stay out or avoid trading during high-impact news events. These events include CPI, NFP, PPI, and FOMC releases. Such events can increase trading risks and lead to unpredictable market movements. (Especially in the Forex market!). RULE #11: The Risk-Reward Rule – Favor Positive Ratios Whenever I take a trade, I always want my gains to be bigger than my losses. To do this I set my risk-reward ratio of at least 1:2. This means, I am only willing to risk one in order to bank two times more. Do this enough times and you’ll almost guarantee your potential gains will outweigh your potential losses in the medium term. And having a risk to reward of at least 1:2 means you’ll factor in the costs, brokerage and other fees with your trade. RULE #12: The 20% Golden Rule – Diversify and Limit Exposure You always need to have capital within your portfolio. Not only to trade, but to protect the current trades that you’re holding at any one time. So this rule is golden. Here’s how it works. I never expose more than 20% of my total investment portfolio to trading. This means, I’ll always be holding at least 80% of my portfolio. Remember, with margin (leverage) trading, it magnifies gains and losses. Having only 20% of your total investment portfolio will help you to always have more money in your portfolio to account for more trades, losses, costs and for you to diversify and manage your risk better. RULE #13: The Hedgehog Rule – Balance Long and Short Positions I love this rule. In trading you can buy (go long) when the market moves up. Or you can sell (go short) when the market moves down. But sometimes, you might feel you’re over exposed to the long side even though the market is moving up. So instead you can hedge your positions by balancing longs and shorts. If the market turns down, then at least you’ll have some shorts in the mix to make up for the losses with your longs that are going against you. I always try to avoid overcommitting to a single direction. This way I am able to protect my portfolio from sudden market reversals. RULE #14: Multi-Account Rule – Separate Markets I find markets all move differently and yield results at different rates. So what I like to do is open different trading account for different markets (e.g., Forex and stocks). I like to track and trade Forex for one account and stocks for another. You’ll find if you trade too many different markets in one account, it will most likely skew the portfolio and your track record. This is because of the way they all move sporadically from each other. So, diversify your portfolios across different asset classes and markets to manage your risk. Final words. I trust this 14 Risk management Rules Lesson will help guide you to your trading goals. If there’s one thing you should do is print, or save this guide and keep them close for reference. These rules will undoubtedly prove valuable in your trading endeavors.
TVC:SA40Education
by Timonrosso