What is Forex?
Forex.
Money Management
Money management in Forex is necessary to be a good trader.
If you are going to trade in Forex market then you have to make a target on annual basis. The good trader is that person who calculates his profit and should be much disciplined. There should be also enough dare to close your trade on loss. For example you are have made a target to earn 20 dollars daily and you think that 10 trades of $2 dollars each can make this if you are using 1000 lot size approx. 20 points then you have to close your trade if market going 10 points against you. For those who are beginners, I suggest them to use 1000 lot size.
For example: You decide to trade then you must be so disciplined or in other words, you must control your emotions. A trader should draw a plan, which will help them to play in Forex Market. First of all, if you are buying a currency then you shouldn’t sell it at the same time. It shows, you are not confident enough on your opened trades which are so risky. Second thing, try to use stop/limit for immediate entry or exit. It will help you to not lose big money. A trader should try to play with stop limits. Suppose trader decided to make a trade for 20 pips profit, then s/he should exit the minus 10 pips if market goes against your expectation. Third, you should know what your daily target is. Like the inflation rate of a country is 5% and a trader think, if he is not going to make big money but he will try to get net present value of the future value. The monthly target should be 0.42%.
Here is the little example
Trade Lot: 1000
You analyzed the market and going to make a trade and decided to buy Pound against Dollar.
Set the entry limits, stops and closing.
20 Pips Profit $2/
10 pips Loss $1/
20 pips Profit $2/
20 Pips Profit $2/
10 Pips Loss $1/
20 pips Profit $2/
10 Pips Loss $1/
10 Pips Loss $1/
10 Pips Loss $1/
20 pips Profit $2/
Above given example shows, trader have earned $10 and lost $5. So, the net profit is $5 dollars.
Leverage
Leverage is for professional. Leverage is future borrowing. Leverage can be defined as a use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment and why I said, Leverage is for professionals because if you are trading with high leverage that makes your usable margin less. So, be aware of it. The key of Forex is usable margin and used margin. A trader should keep an eye on it.
