We all know that trading is business and it is a good one for making money too. That is why more and more traders are getting into this business. And most of them are joining the Forex trading marketplace. When you are a newbie, your first concern about this business would be what the possible mistakes are made by novice trades. Traders search the internet to look for the most common ones in the business. They do it because of taking preparation against those. While doing so, most of the traders miss one of the most common and major mistakes. We are talking about the money management of your trading business. In this article, we are going to show you how to keep your investment safe from your own trading.
How much should your risk?
The first planning for your investment should be, how much you want to use for trading. Yes, you heard us right. We are not telling you to invest all of your trading capital into your trades. Instead, you should think about the percentage of your total capital. To be clear, you must trade with about 40 to 50 percent of your whole money. And the rest should be the backup of your account. Thus your trading would be for relaxing. Because there will be no tension of losing. In case you lose all of the amounts of risking capital, you can use the backup to keep on running your business.
Setting up your trading environment
Trading environment is one of the key factors that determine your success. If you rely on the low-grade broker you are going to end up by losing a big sum of money. Due to this reason, the elite class UK traders always trade with Saxo since they are one of the best brokers in the financial industry. In options trading, you have to be very careful about the timing of your trade. If you take a huge risk in each trade, there is a high chance you will end up losing all your money. Take your time and trade the market with managed risk. Never take any unnecessary risk in the retail trading industry rather concentrate on long-term trade setup. Be brave when it comes to taking a decision in a volatile market. But never ignore the importance of money management in the Forex market.
What should be the plan?
Now that you have sorted out the amount of your total risk, some work has to be done for that capital. It should be planned according to your trading quality. If you have relatively poor performance, you will lose more often than winning some. So, the possibility of losing money is more than you will earn from this business. In this case, you must plan for your risk per trade. What we mean by that, you must trade with smaller risks. This will help you in controlling your losses and reducing the amount. When you do so, your brain will be in less stress about the investment. And, there is nothing better for your trading performance than relaxation.
Why no frequent trading?
For all traders, the frequency of trading controls your performance. When you are a novice, your method of trading would be more frequent than an expert. You might think of trading with scalping or day trading method. Whereas an expert would trade with swing trading or position trading. We would not recommend you to choose the long-term trades. But, to be relaxed in this business, you must plan your trades in a simple fashion. You can use daily charts for trading and make plans on trading for about 4 to 5 hours. In this period, you must forget about the live trade. Because if you do the opposite, your head will be bothered with tension. And that is not good for your performance or the trading capital.
This is a collaborative post.