Strict discipline is required to succeed in Forex trading and Day trading. That being said, it all boils down to good money management – to determine the amount of money that you can trade, the perfect time to cut your losses, and the time to stop with money still in your pocket. If you can’t manage your money properly, then you can’t trade long enough.
10 Money Management Tips
1. Don’t be greedy
The simplest means of money management in trading is to never be greedy. When you are up, don’t hesitate to take your profit instead of waiting for a larger sum of money. Do not be greedy and take the money. Stop your trades and call it a day.
If you are having the best time for about a week, a month, a week, or even a year, obtaining strong profits regularly, take some of it and save it as a retirement fund, move to a low-risk investment or pay off some debts. Even if you don’t do anything on it, taking some of your profits can inspire you to stay in the game and continue your trades.
2. Use Stops
Using stop orders will help you maintain your discipline in trading. This action is automated and will help you to stop incurring more losses and lock your profits.
3. Apply Gann’s 10-percent Rule
This strategy is quite complicated but very effective. Once done successfully, you will be able to identify those security trades which are naturally good.
4. Use the Fixed Fractional System
Fixed Fractional System is used to limit your losses in trading. Using this strategy, you can pick up more wins as you consider the amount of trade that you can have.
5. Use the Fixed-Ratio System
This Fixed-ratio system helps in increasing the returns in every trade you make in Forex Trading. Its main goal is to protect your profits and increase your chances of winning trades.
6. Use the Kelly Criterion Formula
The Kelly Criterion Formula ensures that the trader won’t run out of funds. Usually, this Kelly Criterion generates trades with sizes larger than the amount that traders are willing to utilize.
7. Use the Optimal F
Optimal F helps you to figure the best amount to trade. In this strategy, you have to come up with a certain fraction from your trading account, based on your previous performance.
8. Use the Monte Carlo Simulation
This strategy enables you to measure the risk and the sizes of trades. In Monte Carlo Simulation, you will be entering the risk and return parameters right into the computer program. Then it will tell you the chances of total loss and the ideal trade size.
9. Use the Martingale System
Starting with a small amount for every trade, check if your trades will work out. If it does, have the same amount on your next trade. If it won’t work, close the trade and double the amount on your next trade.
10. Throw It To Your Fates
There are a lot of traders who have difficulty with money management. If you are sure of something, why don’t you put your money and trade? If you think that your next trade will be great, try your fate in trading and see if it really works out.