The Concepts of Money Management

Once you have developed a Forex Trading Strategy with a positive expectancy, good money management will then be the biggest factor in determining how fast and how large your bankroll grows. Even a Forex trading system with a positive, but still only mediocre, expectancy can be turned into a money machine with the right money management techniques.

Money management is a study that mainly determines how much can be spent on each trade with minimum risk. For instance, if too much money is risked on a single trade then the size of a potential loss could be so great as to prevent users realising the full benefit of their system’s positive expectancy over the long haul.

A good Money Management strategy, combined with the following concept, makes it more amenable for beginners because it enables them to advance their trading knowledge in small increments of risk with maximum account protection. The important concept is ‘do not risk too much of your balance at any one time.

After success has been achieved with a low-risk operational configuration, higher risk ones can be introduced by altering the settings one at a time. Once you have obtained a series of successful advancements, you could then use your trading system with the following settings:

More than 1 lot traded, 10% of your total margin could be traded,more than one currency pair will be traded and more than one trade can be active.