Methods to manage capital in Forex market

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Methods to manage capital in Forex market

To succeed in currency trading is possible only at strict observance of the main rules.

To start the trader will have to choose a suitable strategy that will ensure minimal risk with good returns. The second stage is becoming a proper money management, without which the risk of losing real savings becomes quite relevant. The third component contributing to successful trade in the Forex market is proper trader discipline and pre-determined rules.

However, the backbone of all principles is, of course, capital management, which need to master absolutely every trader. For the beginning player should understand how to open and close positions in the trading terminal. A useful skill is the ability to test a strategy based on historical data.

In the presence of a proven strategy there is no doubt that the income will be permanent for you, and with the right money management trading results will gradually improve.

Money management techniques

There are several methods of capital management, but we consider only the main ones.

1. The lack of money management. This method is used by many players and is based on the fact that to start trading at a signal.

2. Multiple contracts. The method resembles the preceding, but differs from it in the fact that a trader simultaneously enters into a few transactions.

3. A fixed amount of at risk. The trader specifies the amount he is willing to risk for trading in the Forex market. If it meets those risks, which are presented in real time, is to enter the market at the signal. You can also apply a fixed percentage of the investment if the trader easier to operate with a percentage of the total value of the account. For example, if a player is willing to sacrifice no more than 5% of the total amount, for transactions chosen such part of the Deposit and not more.

4. Approval of trade deals with the profit and loss. This method is known as “building the pyramid” and can have both direct and inverse approach. Using this method, the player initially determines your trading volume, making a profit from another transaction. If the transaction turned out unprofitable, the trader doubles the trade volume, with the aim to restore the lost funds. Many people know this method of money management as the “martingale system”.

5. The intersection of the curves of cost. The player chooses a long or short moving. If the average exceeds the long moving short, then, the system showed better result than last time. Having understood this information, the trader can open the next position. In the case when the short average is below the long, should refrain from the purchase order.

6. The application of optimal f. This method of money management carries with it some risk, but rational use of allows the trader to earn a lot with little risk. At the same time, beginners who want to master this approach, must first to work with him on the forex demo.

In conclusion, we should remember another important point in managing capital, which is based on the method of trading. You can choose aggressive or conservative style, building up a Deposit in the first case, actively, and in the second, making it slower. Choose the appropriate method, given that it directly affects the profits and risks.