Forex Blog

There are many similarities between the money management strategies in the gambling and the Forex trading. In fact there are too little differences between money management in any risk-based money making. Of course, that fact doesn’t mean that Forex market is a casino and traders are gamblers, there are many other properties that define Forex from the gambling industry but that’s another story. I’ve uploaded a new ebook to the site today — Money Management in Gambling. Actually it’s just a section of one book written by Dr. Edward O. Thorp (The Mathematics of Gambling), who was one of the first to introduce high mathematical theories into the professional gambling. His take on money management can be used no only in gambling but also in any financial trading. With the abundance of tables, formulas and examples Thorp explains the most basic and the most useful aspects of money management and risk-wise bet positioning.

I’ve recently ran across an interesting money management book — Money Management: Controlling Risk and Capturing Profits by Dave Landry. It’s a short e-book, written in four parts. First part simply explains why the risk management is important in the financial trading. Second part gives some interesting advices to organize your money management strategy, or to help you create one. Third part is where some of the Forex professionals are sharing their experiences of poor and good money management. And the final one, fourth, is the most interesting one, in my opinion, — different Forex professionals share their lessons of risk-wise trading.

I’ve also changed the structure of the Forex e-books section a little. Now I have a separate list for beginner, general, advanced, psychology, strategy and money management e-books.

Now you can freely download another money management in trading related Forex book from my site — Mathematics of Money Management: Risk Analysis Techniques for Traders. It is written by Ralph Vince, the author of many books about the use of math in trading. Although this e-book is quite heavy on mathematics (calculus and statistics) it’s intended for the general readers — both for those that are fluent in numbers and those that are not. You’ll find some working methods and formulas there, that, if used in your own money management strategies, should help you to avoid many of the problems financial traders encounter. It’s quite a big e-book and isn’t very easy to understand, so be prepared for some long read.

Another great e-book was added to my site today - it is “Trade Your Way to Financial Freedom” by Van K. Tharp. Too bad it is a rather poor quality scan. Nonetheless it is a very important book for all financial traders. And, in my opinion, it is especially important to Forex traders. Because it has so wonderful section about position sizing and money management which is usually Forex trader’s biggest problems (at least it was and somewhat still is for me). It is a big book with a lot of useful information. But if you don’t have enough time to read it all, read chapters about position sizing and R-multiples. This will probably change your way of thinking about successful trading strategy.

Revising my recent trades which were made during the last month I still find myself making the same mistakes I’ve been doing as a newbie trader. The amount of these mistakes lowered, but sometimes emotions overcome the mind and the strategy and as a result - pips are lost. Here is the list of most devastating and stupid things you can make in Forex trading:

1. Don’t place stop-loss - sometimes I just forget to place, sometimes I hope for the price to eventually go in the right way and think that stop-loss will be an obstacle. This is wrong! Always place a stop loss - it’s good to have it significantly lower than your targeted profit.
2. Trade in lots too big - even if you are100% sure that this position will be profitable, don’t make it too large - 1%-5% is more than enough. Losing 20% of your deposit will require much more risk to recover.
3. Overtrade - everyone says that it is bad to overtrade, but for a trader it is always hard to stay away from market when there is “so many opportunities”. Just try to set a limit of daily/weekly trades for yourself. Overtrading is a result of the mindless emotions, not your mind, so avoid it.
4. Closing the winning positions too early - it seems OK to get some guaranteed profit against risking to wait even more. But trading experience proves that early closing for winning positions and waiting for losing positions to go green - is completely wrong. Let your winning positions run and cut your losing ones early!
5. Following forecasts and signals - for some traders it’s hard to avoid this, especially when there is some Forex guru they respect. Trading with your own strategy and full responsibility is the only way that can make you a professional and successful Forex trader.

I am quite sure that you’ve already read such advices a dozen of times, but they are always good to remember, so consider it just as a helpful memo.

Now you can download one more e-book about money management in Forex market from my books page. The new e-book is called Money Management by Dave Landry (not very original, isn’t it? ) . It is quite a short book for such an important topic - only 19 pages. It consists of four chapters and is written in a very easy manner which makes it a very good book for Forex beginners.