Money Management - somebody pls help me out!

I am so green in forex that my questions are so elementary, pls bear with me. I need a lot of words of wisdom to help me right now.

I have read so many times that MONEY MANAGEMENT is important. Is there more to it than deciding my stops and limits? How do I mitigate a losing trade or enhance a winning position?

I also need a little encouragement right now. I have already lost $10,000 of my initial margin. I am not going to miss a meal because of this - but it is still 10 grand that I could have used to buy a hot spa. :smiley:

I have seen posts about how much money or how many pips people make by following their trading plans. I still have to see posts that say how much some traders lost.

I still believe I have a better chance with forex than in the Las Vegas casinos. I look at it as always having a 50%-50% chance of winning - better than the gambling odds of 20% me and 80% house.


We learn valuable lessons when we lose, and we seek advice only after we have been dooped. Dont worry, you are not the only one here who is this way. Disciplined Money management is required and mandatory when dealing with FOREX. It is not like the Stock market, that if a stock slumps today it will come back up. Secondly the Leverage which we use in FOREX is a two edged sword. It can really slice your heart open when the market moves against you and an awesome weapon to generating good profits when the market moves in your favor. WIth every trade you do, research extensively, on if your trade can be the one where you can make your dough. Read Forex Forums, and since you are a starter (rookie) stick with one currency. Learning Forex needs lots of patience. For starters go to Learn How to Trade the Markets and go through all the grades. Remember “PATIENCE” Understand the concept of forex, going through the school doesnt mean reading it like a fictional book and move on to the next one. Understand the concept of using technical and fundamental analysis and how relevant it is when you are trading. Before going into recovering your losses, forget about it for now and concentrate on opening a demo account, get yourself used to charts, terms, slangs in Forex. Once the trades you do are majority winning trades, open a Mini account (10,000) rather than a Standard Account (100,000).
Hope this helps.
Good luck Trading

The single biggest determinent of your risk is your trade size. The bigger you trade, the more you risk. Your money management process should primarily focus on looking at the pips at risk a given trade would have, then determine the position size which matches the dollar amount you are willing to risk on a given trade.

Before any of that, though, you need to make the decision what your risk per trade is going to be. That comes from a combination of your personal risk tolerance and your trading methodology.

I’ve read here somewhere… and it made sense to me.
That Money Management alone will only do one thing for you, help you to lose your money alot slower. Should really dive in and paper trade or demo trade several systems until you find one that makes sense to you. Then when you got one that is working with money management to control your losses. That should swing the 50/50 more in your favor. ;o)

I�m new to this market as well. I use position sizing in the stock market all the time. Here is how I see position sizing in Forex, but this may not be correct.

$5000 * .05 (risk) = $250 / 20 (pips) = $12.50 per pip or 12 mini lots. You don�t need many pips to make profit and the .05 risk can be adjusted to your risk tolerance. If you get stopped you will lose 5% of account. The 20-pip stop is just hypothetical. I think the formula is right but not 100% sure as of just yet.

Now with this crazy set up you would be excited to just make 5 pips per day and if your entry is good and your hit rate is high you could compound this over time and be very happy… Easier said then done I guess.

Say you had 10K in your account well don�t position size the entire account. Say 2K for starters. Well you could use the same formula.

$2000 * .05 = $100 / 50 = 2.00 or 2 mini lots. You should be in demo mode and try it out. I for one think position sizing is the key with logical money management and a plan that is not wavered. I for one do not deserve to give advise in Forex as my plan is still in the making and so I�m sure some Forex vet�s can advise you much better then I can.

My own demo trading has me scratching my head as I�m learning something new everyday. Well one of the biggest learning points I�ve been experiencing is trying to force the trade.

I understand that I should trade in smaller lots, but my standard account would only allow me to trade in 100,000. Should I close this and move my money in a mini account where I can trade as small as 10,000?

I read somewhere that I should not make a trade unless I think I can get 20-30 pips from it. However, this opportunity rarely happens for me. Should I be happy with 5-10 pips and then make several trades? Or should I wait for that one elusive 20-30 pip possible move and then make one or two trades?

I would be willing to bet with proper position size 5-10 pips consistantly over time would blow your mind. In fact 5 pips could set anyone up with a nice nest egg… despite what everyone says…

Good money management [I]applied to a losing system[/I] will only slow the process of going broke. When it’s applied to a winning system it could actually improve long-term performace considerably.

A statement like that is very trading style/method specific. Unless you are trading similarly to the person who said that, it really is meaningless to you.

I would open a micro account with $1000 as this will allow you to trade 1 micro lot using 1:1 leverage. While developing a winning trading strategy you do not want to leverage yourself too high (prob. should stay under 3:1).