Money management in forex market

This may be my quick version of forex money management, but there is nothing more important. As I

have been told over and over again, any one can get into a currency trade, but those who are

profitable forex traders know when to exit a trade.

This is for profits as well as loses!

I find that the best forex trades I put on are those trades where my emotions are not a factor in

the currency trade to begin with. To do this there are some basic principals I follow regardless

of the strategy or time period I am trading.

•I set a pip goal for the trade based on my trade plan and technicals. If you do not have a trade

plan where you have outlined your currency trading goals and objectives then stop reading this

blog and create one now!


•I never risk more than 5% of my account on any given trading opportunity. To calculate the

amount I will risk I divide my trading account principal by 0.05 and then divide that by my stop

loss (dictated by the strategy I employ) to give me the number of lots I will place on the forex

trade. This is the number I am personally comfortable losing. Yes, I said losing! I always

approach risk management in forex trading from a “what if I am wrong” point of view.

•I always trade with a stop loss and limit order! This takes the emotions right out of the

equation. I have learned with experience to employ trailing stops and fine tuning of my

technicals to lock in profit and provide ever increasing better entry and exit points. Over time

I have been able to let more winners run and cut loses shorter than when I first began trading.


•Here is my forex money management “golden nugget!” If take pause after a draw down of 25% AND

after a run up of 25%. During this 2-5 day period I trade in my demo account, practicing new

strategies or reviewing the basics. This keeps me grounded when I am too down or too up.


These are my rules. By keeping a good forex trade journal you will be able to recognize

your strengths and weaknesses, and employ them in your money management plan.

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