Trading is a very complicated profession but you can grab a hold of this trading market then it will become the easiest way to make money. But grabbing hold to this market is not that much easy because if it was so easy then everyone in the world will like to join the market. But the truth is that staying alive in this market is much complicated than earning from it. It is true that if you can just stay alive in this market then you will make money eventually. Most traders lose their money just because of not following any money management rule. If you follow money management rules then it will be hard for you to blow your account balance. So in the following article, we will give you some tips about making money management rules so that you can make one by yourself.
Risk Reward Ratio
When you are thinking about joining the trading industry with a certain amount of capital then the first thing is that you just need to fix an amount from your balance that you are ready to lose. After you fix that then you have to fix a risk-reward ratio according to your preferred lot size for each trade. This risk-reward ratio needs to be positive otherwise following it will not be much of a help. Following a risk-reward ratio helps you to stay alive in the trading market and you can lose 55% of your trade and still be in profit. So always consider having a positive risk-reward ratio when you are making money management rules for you.
Trading Without Any Stops
When you have found a price where you are thinking about opening a position then the first thing you must consider that if you can use your risk-reward ratio here. But keep in mind that most of the trade need to have a breathing period before giving you a potential result. It is natural because making a perfect entry form where the market will go in your favor is quite rare. So whatever is your risk-reward ratio you must need to fix it in a way where your trade will get enough space to breathe before giving you a profitable result? Remember that using tight stop loss will not reduce the chances of blowing your account rather than it will increase the risk exposer. If you cannot give your found position enough space to breathe according to your risk-reward ratio than it will be wise to skip that signal and look for another one. To learn the importance of stop loss, you can use a demo account in Hong Kong. Try it now and you will never regret it.
Take breaks means to know when to stop trading a there will be some times when you are losing or winning most of the trades. When a trader is winning streak then most of the time he will get overconfident which will lead him to make certain decisions that will not match with his trading strategy and as result, he will lose some trade. On the other hand, if a trader is in a losing streak then he can become biased about regaining money by opening more options or become nervous about opening any trades. In this type of situation, we would suggest you take a break from trading and do some other stuff which will clear your mind. It can be also considered as money management because taking a break will keep you away from trading and in that time you cannot make any desperate trading decisions.
Trading is the riskiest profession in the world where making any mistake will cause you to lose money and the only way to avoid that is to follow proper money management. So to avoid the risks consider our tips when you are trying to make money management rules for yourself.