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Learn Forex Trading > Day 12 Class  ( Money Management ) > Don't Lose Your tight trouser
Don't Lose Your tight trouser
Don’t Lose your trouser even if it is tight ...

The promise of “Easy Money” captures the interest of many beginning traders. You can find offers all over the Internet claiming, “risk free trading”, “low investment”, and “high returns”. While there is some truth in these statement you will find that they are over simplified and the reality of FOREX trading is a little more complicated.

It is very tempting to dive right in and start trading as soon as you open your FOREX account. Doing this will most likely lead you to make the two most common mistakes of beginning investors. These are trading based on emotions and trading without a philosophy or strategy. While watching the movements of a currency pair you may feel that you are letting an opportunity pass by if you don’t get involved. So you buy only to see the price start moving against you, in a panic you sell at a loss, to then watch the price recover. You must have a rational strategy and not base any decisions on emotion. Undisciplined trading like the scenario described above will only lead to losing money.

You have to be well educated in market movements to make rational trading decisions. You must be able to read technical studies and analyses and use that information to plot out entry and exit points. You must be able to use the various types of trade orders available to maximize your profits and minimize your losses.

The first thing you have to do is to understand the market and the forces that move it and affect it. Learn who trades on the FOREX market and why do they do it. Who are the successful traders and what do they do that makes them successful. By doing this you will be able to identify the successful trading strategies and use them to help you develop a strategy of your own.

Banks, Corporations, Governments, investment funds, and traders are the major groups of investors in the foreign exchange market. While they all have their own objectives four of these five all have one thing in common. They have external controls; these are rules and guidelines that control the trades that they make and the basis that they can be held accountable to. The exception to that is the individual traders, they are accountable only to themselves.

A trader that enters the market with out rules and guidelines is setting himself or herself up to lose money. The “big boys” and the well educated investors all approach trading with strategies, if you want to play on the same field with them and be successful you will have to play by the same rules. You absolutely must have a trading strategy, and you will need to be disciplined and follow it.

Money management is a critical part of every trading strategy. Along with knowing which currencies to trade and how to recognize entry and exit points as successful trader must has to manage his available resources and make money management part of his trading plan. Available capital, margin and profits and losses must all be considered as part of strategy development.

If your investment falls by 50% you’ll need a 100% rise to get you back where you started. So when speculating in the markets, protecting the money you do have is just as important as making some more. This book is for you if you’d like to have a go at beating the system but don’t want to lose your shirt in the process; if you’d like to benefit from the good times and avoid the bad. Topics covered include: index investing, market timing and trend following, stop loss orders, position sizing, straddles and strangles. “I found it very easy to understand, not too much jargon…” “I rather enjoyed the experience notes at the end of each chapter…” “..it’s nice to be able to learn a few things from others’ experiences, good or bad.”


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