Money management is crucial in Forex Trading

[andy003]

The importance of money mangement in forex trading is as much as the trading strategy itself.In fact, it is the money management that should come first and the actual trading next.
Money management is the same as the “Risk management”. The amount of money invested in a trade is directly related the risk it carries. It is ability to bear the loss in case of a bad trade.

Most trading focuses on only making profit. The real focus should be to “protect the capital invested while making profits”. Unnecessary risks only burn the account with false/ill managed trades. Money management allows us to establish our own system in such a way that will guard the most crucial asset-your investment.

[FXexpert]

I agree, many traders do unfortunately get carried away with greed..it's important to protect the initial investment as well.

[effx]

For beginners like me, what is the most conservative % to risk from my account?

[Enivid]

Originally Posted by effx

For beginners like me, what is the most conservative % to risk from my account?

1-2%

[$danmarius7]

I agree, money management should be the first thing to think about for a beginner (just like me). Don't risk more than you can afford to loose.

[andy003]

Originally Posted by Enivid

1-2%

The Rule of thumb is: don’t risk more than 2% of your total capital
How many trades will be successful in a system is never certain. Without money management you can be broke even before you can recover with further successful trades. It will require a new deposit each time. With 1% risk the trade is even more secure. But the key is not to risk any more than 2% of your total equity.

[Sinnerman]

Originally Posted by effx

For beginners like me, what is the most conservative % to risk from my account?

I would take it even more conservatively than the previous posters and say 0%. I suppose it depends on what you mean by "beginner", but if you really are just beginning, then don't risk anything and trade a demo account. Until you know enough to stop calling yourself a beginner, my suggestion is just practice on demo. You'll know when you are not a beginner any more and when it's safe to step out into the wild. I would say good luck, but I'm hoping you won't need it .

[Enivid]

Originally Posted by Sinnerman

I would take it even more conservatively than the previous posters and say 0%. I suppose it depends on what you mean by "beginner", but if you really are just beginning, then don't risk anything and trade a demo account. Until you know enough to stop calling yourself a beginner, my suggestion is just practice on demo. You'll know when you are not a beginner any more and when it's safe to step out into the wild. I would say good luck, but I'm hoping you won't need it .

Good point, but in my experience I've learned better when I traded a very small real account than when I traded on demo. Trading with some real money (but not a big amount) can help to develop a discipline and add the feeling of loss/win.

[Sinnerman]

Originally Posted by Enivid

Good point, but in my experience I've learned better when I traded a very small real account than when I traded on demo. Trading with some real money (but not a big amount) can help to develop a discipline and add the feeling of loss/win.

This is one of those "never-ending" discussions... The reason a real account is different from a demo (besides execution) is the sense of "realness" to every win and every loss. The idea is that you trade with an amount of money big enough for you to care about. If you are trading with an amount so small that you don't care if you lose it, then it's as if you are trading demo - in my opinion anyway. Still I can see people seeing it your way.

And of course, even on demo, you do need to apply proper management, so the 1% risk rule is fairly sound I believe - my point was actually that you should risk 0% of your real money and about 1% of your demo money. It's a good way to test your discipline. If you get greedy on demo, chances are you will get even greedier with real money - and greed is guaranteed to wipe you out.

[Enivid]

Originally Posted by Sinnerman

And of course, even on demo, you do need to apply proper management, so the 1% risk rule is fairly sound I believe - my point was actually that you should risk 0% of your real money and about 1% of your demo money. It's a good way to test your discipline. If you get greedy on demo, chances are you will get even greedier with real money - and greed is guaranteed to wipe you out.

Yea, but if you aren't greedy on demo that doesn't mean that you won't become greedy on a real money account. Anyway, it's a good idea to start your money management learning from demo and then move onto the small real account and only then on a real account with real amount of money.