Make Your Money Management Plans Perfect

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Oct 16 2018
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In every kind of business, you’ll need to make solid plans for management. The trading business is also no different than others. In fact, here, you will need to make more plans and strategies to run your business. Because it is a game of mind and you will have to think a pot for this business. You have to prepare plans for going on a trade and following strategies before going to open a trade. Then there are money management plans. It is very important for a trader’s account, as it can modify how a trade is going to result after being closed.


We will try to demonstrate with a simple example. If you invest a good amount of money into a particular trade, it will be highly expectable for you. You will be looking up to it. So, that trade will be kept open for a longer time. Due to some unfortunate reason, you may end up losing that trade. So, your money management can control the end result of every trade. Today we are going to talk about this money management plans and how you can prepare yourself for it.


Being safe with the whole capital

If you have a trading account, some investment obviously have to be in it. But it is not necessary that you trade with all the capital in your trading account. If you want to be clever and save your business from the future dilemma, some backup from the whole amount should be kept elsewhere. It will act like some backup for your trading account. When the performance in your business is not well and you’re losing too much, the capital can reduce gradually. And if the trading capital gets finished, you can use the backup for continuation in your business. In every step of this business, you have to be clever and do what is good for your own. And this technique is a good plan for saving your back in the bad days.

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Dealing with the loss

If you live in Australia, you must have seen many successful traders. Do you know why the traders in Australia do relatively well in CFD trading profession? Most of the new trader’s investment their time in learning the proper method of trading. Unlike many traders, they are devoted and well disciplined. From the very beginning, they bear one concept in mind, losing trades is inevitable. This simple concept helps them to build a solid career in the Forex market.


Investing very little in every trades

As we mentioned earlier, your investment in every trades controls the amount of profit or loss. If you invest big and do everything properly, the profit can also be big. And when you are being safe and investing little, the amount in profits can be little. If something goes wrong or the markets behave differently than how you expected, there will be losses. And depending on your risk per trade, then the amount of losing money will change. So, according to your own performance and trading quality, the risk amount should be fixed. You should not gamble with your trading account.


Tracking the risk to reward ratios

If you want to know how much to put into a trade, you have to know how is your trading performance. For that, you have to use the risk to reward ratio and analyze how the performances are. If it is consistent and you have a good ratio like 1:2 or 1:3, it is safe to increase your investment for every trade. If the results are not good for example you are exampling 1:-2 or 1:-1 too much, the risk per trade should be reduced to stay safe. This ratio states that your trading approaches are not right and it has to be changed. And in this changing period, you have to play it safe with your money.

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