Money Management

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Money Management

Post  ilearn2t on Sat Jun 30, 2012 8:30 am

Hello Everyone

Money management is one of the most important aspects of successful trading.

For "newbies" your risk per a trade should never exceed 2% per trade. It's better to adjust your risk between 1% and 2% and use the minimum 0.10 lot size = $0.01 per pip.

So if you have a "Mirco" account with a deposit of $100 your risks will look something like this:

1% = $1.00
2% = $2.00

You should adjust your StopLoss so that you never lose more than your precentage target each trade.

Example:

1% = 100 pips (just short of 100 trades before bankruptcy)
2% = 200 pips (just short of 50 trades before bankruptcy)

Most traders prefer to set their StopLoss at a much shorter target as the gains can be made much quicker.

Example:

StopLoss set at 20 pips.

1% now equals 0.50 lot size or $0.05 a pip.
2% now equals 1.00 lot size or $0.10 a pip.

But now we can set our goals for profit:

1% or 2% x 2 = 40 pips

So by setting your target at T/P 40 pips & S/L 20 pips you have a risk factor of 1:2 or one win / two losses (excluding spread & fees) breakeven.

Good luck
ilearn2t



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