Forex money management requires educating yourself in varied financial areas. The forex market involves the exchange of currencies, the values of which change frequently. The factors influencing such change include economic stability of a country, inflation, prime rate, consumer price index, GDP, domestic security and foreign relations.
There are six major forex trading exchanges in the world – New York, London, Tokyo, Paris, Zurich, and Frankfurt. Most of the trading globally occurs in these bourses. The total worth of the global forex space is more than $1.4 trillion. Successful money management in the FX market requires an understanding of the bid/ask spread.
Golden Rules of Forex Money Management
1% Risk Rule: The key is to adjust your risk to 1% for every trade. You might even stretch to 3%, but that should be it.
Risk to Reward Ratio: The second rule is never to risk more than what you can eventually make.
Multiple Positions: Your first trade might give you unprecedented profits, but the key is not to open a second position until you see profits from your first trade. This gives you a cushion from your first trade, so you are not faced with a burden from your subsequent trades.
Like most speculative investments, a key component of money management in forex is risk. It is wise to set aside a portion of your wealth and make that count in forex trading. Remember, the forex market is extremely volatile. Staying on top of what is happening in the financial markets and the global economy is always a smart thing to do. Through years of experience, many traders reach a point where they can predict currency changes based on the political or economic state of a country. If you wish to reach that stage, you need to study the market carefully, research a lot, take extra precaution when managing your funds, and invest only what you can afford to risk.
Before commencing trading, be sure to check out different brokers by studying what they offer. You could read broker reviews and make your move. A good forex broker will help you immensely in forex money management and in raising your probability of success. Visit http://www.forex-rateit.com to get the complete picture of potential brokers.
About the Author
The author Kitz is a digital marketing professional and is associated with Veda Informatics. The Author recommends Foerx Rate It!, which helps traders with the forex broker lists, forex broker reviews, forex education, news & articles.
