Forex Money Management
Learn to control risks in trade. Forex smart money management
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Remember we said earlier that the higher the leverage, the lower the margin? And the lower the margin, the less money is required to keep open trades running safe?
Let's look at the next trading conditions offered by a Forex broker:
If a trader takes the highest leverage of 200:1 the margin is going to be only 0.5%. As a smart trader with a sound knowledge of money management he will never trade inadequately large lots, thus leverage won't hurt him, but he will benefit from a lower margin requirement by dropping yet another worry of getting a margin call.
That's it. Now you know how to deal with the leverage and margin in Forex:
Take any leverage at your choice and taste, but don't overuse your leverage powers; instead trade lots sizes which in your opinion are appropriate for your account size and your own risk appetite.
There is a final but very important fact every trader should memorize:
If you are ever going to step away from the charts and leave trades open without placing protective stops, take the lowest leverage possible or don't take any at all.
Without a stop order in place the risks of losing an entire account balance or its large part increase dramatically. The consequences of some large economic events may shift prices in Forex market by 500 pips and more in a fairly short period of time. The chances are, your account won't be prepared to sustain such dramatic shifts and money will be lost. In such cases the only hope to save some capital comes from nowhere else but a margin call...
That is why trading without stops in Forex means being not serious about long prospective of own investment.
Good luck & Profitable trading to you all!