To be successful, you must not only have technical and fundamental analysis techniques, but also be able to manage your capital properly. Without this, it is impossible to achieve a stable profitability in trade. In this article, you will learn the following about manimanagement: what it is, why it is needed and how to use it correctly.
Manimanagement is a method of allocating funds that reduces the risk of financial losses when trading forex and other markets. From a practical point of view, good capital management allows you to earn income, even if the number of unprofitable and profitable transactions is roughly the same.
Manimanagement is written by Jesse Livermore. He was a practicing entrepreneur. More than a century ago, he formulated the basic principles of working in the financial markets:
Never Trade Without Stop Loss. The maximum risk should not be 5% of your deposit. Do not try to catch the maximum value of price movements. Close averages. Always withdraw the money earned. By following these rules, you can significantly improve the effectiveness of trading. Even good analysts often empty their deposits. This is because they manage capital inefficiently.
Even if you have 10 profitable positions in a row, one more loss item will “kill” most of your accumulated profits. If you risk a significant part of your capital every time you enter the market, you will not make money that way. Therefore, one of the main mistakes of traders is the abuse of leverage.
Not only greed, but also fear can lead to depply consequences. For example, the trader immediately closes a position that has become at least a little profitable. At the same time, he sticks to recent unprofitable offers, hoping to come out in plus, or at least zero. This approach always ends in the same way – emptying the deposit.
Now you understand the basic principles of manimanagement. What does this give you in trading? You will earn on average more modest, but more stable. And that’s the right trade. Forex trading is a long game. Therefore, you do not have to chase decorative money and try to break the big jackpot in one transaction. The more your approach to trade will be conservative, the more profitable it will be.
Post appeared for the first time in G-Forex.net.