Protect your capital as it is your tool to make more money
Money management is probably the most important factor for profitable long term investing. It determines whether you are able to survive in the markets when you have bad months in your trading career. It will also help you to reduce psychological pressure when you have a losing streak. Your money is your tool to make more money in trading currencies. If you lose the tool, your business in the market is over. Therefore, you need to protect the tool. On the one hand, you need to make money, that’s the offensive part of the game that is called trading. On the other hand, you need to protect money that you make and that’s the defensive part of the game. Learn to defend your capital!
Any professional trader that has made consistent money over the year will tell you that it is not wise to risk more than five percent of your capital on a trade. In fact, most traders limit their risk to 1-3 percent on a single trade. This type of defending your capital will help you to survive in the market for a long time even if your trading strategy is not good enough.
Forex Signals – Money Management
Check money management of your Forex signal provider
Needless to say it is a very important factor in selecting a forex signal provider. You can do your own analysis on the above mentioned platforms to find out for yourself. I did see some good traders there, but a lot of bad ones too. Is it smart to take 10 pips of profits regularly and risk hundreds or even thousands of pips when the market turns against you? No. However, that’s exactly what a lot of traders offering signal services do. Unfortunately, they have a lot of followers and they not only lose money themselves, but also the money of their followers.
To cut the long story short, you need to be sure about money management of your service provider. If he has large draw downs, I would advise you against subscribing to such a service as you might lose all of your deposit before you can manage to say Jack Robinson. Better choose to follow more conservative traders who have smaller profits, but also far smaller losses. Remember, you want to be in the game for a long time and it can happen only if you protect your capital.
