Nial Fuller’s 5 Golden Rules of Forex Trading Money Management (Risk…
Nial Fuller’s 5 Golden Rules of Forex Trading Money Management
How much should I risk on a trade?
how much money do you have as disposable income that you can realistically afford to lose?
no emotional attachment to your trading money.
risk on a trade should always think in terms of dollars risked, not in pips.
The proper implementation of risk reward is how professional traders make money
Risk reward should be thought of as the “workhorse” of money management
first calculate the risk involved on any potential trade setup AFTER you determine the most logical place to put your stop loss
you then can determine what the potential reward is based on multiples of your dollar amount risked
Position sizing allows you to risk the same amount of money no matter what price action trading strategy you trade or how large or small your stop loss distance is
you can adjust your position size up or down to meet the necessary stop loss distance
FIRST determine the most logical place to put your stop on a trade setup
THEN calculate the number of lots you can trade to maintain your pre-determined risk amount
How effective money management helps you manage your emotions
There is a reinforcing loop between money management and emotion management
the better you manage your risk and money in the Forex market, the easier it becomes to manage your emotions
if you are effectively managing your money you are unlikely to become emotional.
Master your Forex trading strategy
confident in your trading strategy and have no doubts in your mind about what the market should look like before you risk your money in it.
domination of your chosen Forex trading strategy will tie all of the pieces of money management together and make them work in your favor