What is money management in forex trading

Forex brokers will rarely teach traders good money management skills, though almost all brokers will offer some sort of education, therefore it’s important to also learn on your own. The main idea of the whole trading process is to what is money management in forex trading! Survival is the first task, after which comes making the money.

One should clearly understand that good traders are, first of all, skillful survivors. Those who also have deep pockets can additionally sustain larger losses and continue trading under unfavorable conditions, because they are financially able to. For an ordinary trader, the skills of surviving become a vital “must know” requirement to keep own Forex trading accounts “alive” and be able to make profits on top. As you can see, this simple decision — a money management approach — can have serious consequences if misjudged. Forex trading is a high risk investment. All materials are published for educational purposes only. Margin in Forex identifies a requirement for the trading account to have certain amount of real funds on balance as a collateral to cover any possible losses.

Margin makes sure that while having trading positions open, traders have just enough real money on balance to cover losses if they are to occur. Margin requirements vary from broker to broker and depend on the leverage being offered. 500 on hold per each lot of 10 000 units. In case a trader uses the entire Available margin he will no longer be able to open new trades, and should monitor carefully any open trading position that is currently at loss. If the losses continue to accumulate further, there is an immediate risk to get a margin call. Maintenance margin, Required margin, Used margin — also are synonyms, which suggest funds that are in use, currently locked in order to maintain currently open trades. Margin call simply means that all or a certain part of open trades will be closed in order to prevent further losses beyond the real account balance.

That’s why traders try monitoring their account parameters as they trade. Who’s online There are currently 7 users online. Submitted by Edward Revy on July 16, 2009 – 17:20. We believe it is time to open a new Topic dedicated to Money Management.