What money management rules should you set

In this article, we will discuss what money management rules everyone should set and follow.

Money management rules are of course an essential part of trading and everyone should use them, otherwise you go to the financial markets to gamble not to trade.

Each financial market behaves differently and needs to be approached differently, so always be sure to tailor your rules to the strategy and market you are trading.

The main goal of anyone who starts trading is undeniably to succeed and make money. Unfortunately, most beginners take too much risk and then when they see that they are losing they often start making even more rash and risky trades and this then leads to the account being deleted in most cases.

To avoid this, always use no more than 2% of your total capital per trade. Also, don’t have more than 5 trades open at a time and if you trade stocks, don’t buy GOOGL, AAPL, META stocks because they are correlated, if Apple goes down, probably Meta will go down, etc. So by buying each of these shares at 2%, it’s the same as buying one of them at 6%. The same risk applies to currency pairs that are correlated with each other, stock indices and commodities.

Then there is the human factor, unexpected events, connection failure, etc.

I’m sure it has happened to everyone at some point that their internet has gone down, they’ve had to deal with something else urgently, they’ve been hospitalized or otherwise indisposed.

We can easily protect ourselves against these unfortunate events by using stop losses and take profits and every trader should use them.

 

You should always determine in advance the risk you are willing to take on a trade and your potential risk should always be less than your potential gain.

 

Before you enter a trade you should always be clear about the strategy you are going to trade with and do your analysis, whether it is technical or fundamental.

More articles

What money management rules should you set

In this article, we will discuss what money management rules everyone should set and follow.

Money management rules are of course an essential part of trading and everyone should use them, otherwise you go to the financial markets to gamble not to trade.

Each financial market behaves differently and needs to be approached differently, so always be sure to tailor your rules to the strategy and market you are trading.

The main goal of anyone who starts trading is undeniably to succeed and make money. Unfortunately, most beginners take too much risk and then when they see that they are losing they often start making even more rash and risky trades and this then leads to the account being deleted in most cases.

To avoid this, always use no more than 2% of your total capital per trade. Also, don’t have more than 5 trades open at a time and if you trade stocks, don’t buy GOOGL, AAPL, META stocks because they are correlated, if Apple goes down, probably Meta will go down, etc. So by buying each of these shares at 2%, it’s the same as buying one of them at 6%. The same risk applies to currency pairs that are correlated with each other, stock indices and commodities.

Then there is the human factor, unexpected events, connection failure, etc.

I’m sure it has happened to everyone at some point that their internet has gone down, they’ve had to deal with something else urgently, they’ve been hospitalized or otherwise indisposed.

We can easily protect ourselves against these unfortunate events by using stop losses and take profits and every trader should use them.

 

You should always determine in advance the risk you are willing to take on a trade and your potential risk should always be less than your potential gain.

 

Before you enter a trade you should always be clear about the strategy you are going to trade with and do your analysis, whether it is technical or fundamental.

More articles

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