Money Management Tips For Forex Traders

There's no doubt that forex trading is a growing industry, but most traders find that it's not easy to become a profitable trader. A major problem encountered by the majority of novice traders is that they do not know how to successfully manage their money.

This can be critical because even if you employ a successful trading strategy, you may still end up losing money if you are playing with high stakes that you can't really afford. The worst thing you can do is to adopt a gambler's mindset and open a large position when you are full of confidence about a particular set-up that may occur.

Sure you may get lucky and enjoy some huge winnings, particularly if you use a lot of leverage when opening the position. However it only takes a couple of losing trades to make a serious dent in your trading capital, and if you don't employ any stop losses you could easily lose all of your money.

So the point is that it's important that you forget about the idea of getting rich quick through forex trading. This is nothing more than gambling and it's definitely not the most effective way of generating sustainable long-term wealth.

A more productive strategy is to try and build your trading pot slowly and steadily. As long as you are employing a tried and tested trading strategy, you should find that your account will grow nicely in the long run simply because the size of your positions will increase in accordance with your trading capital, providing you risk a certain percentage of your capital on each trading position.

For example if you are prepared to risk 5% of your trading capital on each set-up then you will be risking $500 per trade if you start off with $10,000. However if your account does well and goes up to $15,000, for instance, you will then be risking $750 per trade, so as a result your gains will go up as well whenever you experience some winning trades.

I don't personally believe that you should risk as much as 5% on each trade. I think 3% is a more cautious and suitable amount because it then becomes much easier to absorb a handful of losing trades without making too much of a dent in your capital. We all strive to achieve a 100% success rate, but this is simply an unrealistic target, so it's worth bearing in mind that you will have losing trades along the way so risking 3% of your capital is a sound strategy.

A very productive strategy is to let your winning trades run for as long as possible because this will automatically lower your required success ratio and it will also mean that your successful trades will be far in excess of your initial stake. For example if you are risking 3% of your money on each set-up, you may find that a trade that moves heavily in your favour could easily generate the equivalent of 6-10% of your overall bankroll.

So I think it's worth making the point that it's absolutely essential that you protect your trading capital and use a sensible staking plan when trading the forex markets. If you don't do this you will end up gambling your hard-earned money away.

Some Basic Forex Terminology

Forex is likely something you have never even heard of. As such you're probably pretty scared and excited at the same time. Taking on any new investment means your money could go up in smoke.

As you know money can buy you many things which can provide you enjoyment. So when you put that gratification on hold to instead buy into an investment the risk is you will never get any enjoyment out of that money.

This is the primary reason I want you to learn more about the Forex markets.

Since foreign currency market is a mouthful some clever investor shortened it to Forex. This market operates similar to the stock market you know and love, or hate in this recession, only you are trading your currency for the currency of another country.

This market is normalized so that the only thing you can trade are pre-designated currency pairs. So you can't just say you want to buy Iraqi denars. The market is organized into the 7 main currency pairs with the US dollar, Euro, and British pound being prominent.

Pips are the term used to describe movement in the pair. As 1 of the currencies in your pair moves up the other one is obviously moving down. There are too many factors to list here as to why currencies move relative to one another. When a country's economy is doing well it's currency is worth more compared to other country's currencies. On the flip side of the coin when a country is in trouble its currency tanks.

No matter where you are in the world you are getting to observe this first hand as the US dollar continues to plummet. Other countries and investors are tired of buying our dollars because of all the inflation and excessive speding the Federal Reserve is doing. This means more US dollars have to be offered for the same amount of foreign currency in order to entice these investors to keep making the exchange.

One other way you can see this manifest is that the price of gold is at all-time highs compared to the dollar but nowhere near its highs against the Euro.

Now after this brief overview I hope you have a deeper understanding of how to successfully play in this marketplace. Like most any stock market there are symbols to designate the currency pairs. In the US Apple Computer is APPL and IBM is just simply IBM.

A symbol of gbpchf is the Pound Swiss franc pair and the eurgbp is the Euro British pound pair.

Pips simply designate a certain move in 1 of these currency pairs. To find out how much dollar amount you'll make in profits is going to depend on the lot size. Once you know your lot size you can multiply by the pips to figure the gain or loss. When trading in bigger lot sizes like when you trade more shares of stock your potential for gain or loss is magnified.

Pips are a more absolute to compare apples to apples no matter the lot size you trade. A 50 pip move is the same amount regardless of how big or small a lot size you traded. It really equalizes it so intelligent comparisons and decisions can be made.

You can talk to other investors and have an intelligent conversation now. This way you don't have to get into specific dollar amounts.

Trading currencies can be very lucrative but some basic education and knowledge are jargon can stack the odds in your favor. Fap Turbo software closes this gap for you so you can make solid profits.

Fresh Path For the New Year

The past year has been very rough on traditional investors; investments have blown up in the faces of people who had been religiously putting funds in 401(k) plans and IRAs and chances are their home values have crumbled around them as well. Thousands more got caught in a layoff and are now forced to use what is left of their savings to simply survive, while thousands more have lost their homes to foreclosure. It was the kind of year that people will talk about for the rest of their lives; just like Grandpa used to talk about the Great Depression of the 1930s.

Many businesses have collapsed under the stress of this fragile economy; some are still alive but running on the fumes of what they were able to scrape together soon after the recession hit them. Like I said, it's been a tough year but it is not impossible to overcome. Now it's time to rebuild our personal and professional lives.

As we enter the holiday season, I see the effects of this economic downturn hit yet again. Corporate CEOs and HR managers have had to do what was in the best interest of their companies - normally that means trimming the employee roster - at least for the time being. We've all had to determine where costs can be cut to generate needed cash flow so American companies can stay "open for business" and start to mend our damaged economy.

The same goes for families across the U.S. trying to find their "new" paths to personal financial freedom. Many of you were doing everything correctly and thought you had it made, only to discover that traditional methods of investing just didn't work anymore and established family traditions had to be cut or done away with all together.

I've heard more and more people say that this year's holiday season will be different - this year there won't be as many presents given to as many people as there have in the past. Charitable organizations are already feeling the pinch because there are fewer donations coming in this year than in previous years. For many charities, the recession has delivered a double blow. There have been sharp drops in donations tied to increasing demand for their services in these difficult economic times.

Maybe it's time for us all to start cutting back and simplify our lives. Perhaps we all should cut back a bit and use the extra time and money to get closer to our family and friends. Read more to your kids and grandchildren, and get interested in what your spouse is working on in the kitchen or out in the garage. Invite your friends over to play a board game - these are all things that will allow us to reconnect with people; something that is probably long overdue.

Like "Grandpa's Great Depression," we must now find new ways of doing things; changing our lives is not an option anymore. Prior to 2009, Americans were not savers - today more and more of us are starting to put money away for that proverbial "rainy day." American business now understands that their consumer base has changed their spending habits and has had to get creative to keep things moving forward. This is all positive. These are all things that we should have been doing all along. Maybe if we had done so, the economic situation would not have hit us all so hard.

So this year, instead of indulging ourselves in a rich holiday season, maybe we should focus on what we have remaining in our lives. We need to center on giving thanks for the food and the time we can share with our family and friends, and celebrate the things that we believe in; commemorate the holiday traditions that make our lives meaningful. And one more thing, don't forget to spend a little quiet time with yourself this holiday season, reflecting on the past year and looking toward the future with optimism.

Happy holidays,