Money Management

Know how to manage the owner is the difference between a professional trader and merchant hobbyist. Thus, money management skills are essential for all types of traders , whether a trader uses technical analysis or fundamental analysis or basic commerce , and others. The ability to understand the meaning of open trade with high leverage can prevent the loss incurred .
The most important question that every trader should ask himself is , " What is the biggest loss that I incurred in all transactions / day? " The fact that there is no absolute answer to this question, but it is supposed to be over this loss of 3-5% of the account. And if you put an end to limit the maximum loss that can be incurred , you thus ensuring the continuation of your account is open for a longer period in the market.
Once you know the maximum loss that you can carry around , it will be easy for you to determine the level of leverage that you use . Every time you enter the market, you will have to evaluate the potential loss ( points ) and in the case that the deal does not work. Then you divide the maximum loss that can be carried by the potential loss of a specific deal . The output will be the size of the loss that can be incurred in the transaction.
For example , suppose that your account is $ 10,000 , and you have found an excellent trading opportunity on the EUR / USD and estimated that a stop - loss order is bound to be under the entry point by 100 points . Likewise , I have decided that the maximum loss that can be incurred in the transaction is $ 300. If you divide 300 by 100 you 'll learn that the maximum that you can afford the loss of this deal is 30.000. Because your account is 10.000 , the leverage that you used in this case is 1:3. This process is different computational completely if I have several deals at the same time .
The calculation above is what you 'll need to let the graph " tells " the loss is likely to occur in the deal , as they lead to consensus leverage and trading volume with the limits specified.
In the following article we will address how to manage the deal alive.