Friday, March 27, 2015

Forex trading Tutorial For Beginners Part 5 Money and Risk Management

If we talk about money management and Risk management in forex, actually this term are pretty simple to understand! in fact 9 years old kids can understand this concept very easy! first lets talk about money management concept! money management in forex related with lot! the idea of good money management appears simple because in forex industry there's so many trader that get burn because of margin call! this kind of tragedy happen all the times! For example, if we have 5k, or 5 thousand dollar in forex acc! our  leverage 1:100, and then we trade 2 lot when the FED almost announce the next interest rate! let's say, the FED increase Interest rate 50 basis point! you trade EUR/USD pair! meanwhile, Eurozone economy are not in good shape, because yesterday, their GDP rate drops 1%, so the trend tends to be down! i.e weak Euros! this could happen several weeks, if their GDP decrease significantly!
after you see some chart, and you get some hint from other trader, let say your hero trader said, and bet short on EUR/USD, because that currency pair already overbought! most of the technical trader, usually will short/sell if some pair already overbought! because they think, after goes up it will goes down ;) yeah right! you know what I think, if goes up, it will not goes down ;) that's what I think! at least after our money drop! and loss! for some reason, maybe someday you will know what I means ;) hehehe! ok, get back to topic!

 You see EUR/USD chart in overbought position, other trader also think the same way! the Fed giving you valid assumption! and the fact they increase their interest rate 50 basis point! and your felling said, this is a good sign and times to make money ;) especially last week you already loosing big money! without thinking hard, you put 2 lot and bet on eur/usd fall! i.e EUR/USD short sell 2 lot! well, guys! Before you make big profit! lets pause that moment shall we ;) just like in the movie, and everything stop! and then everything start to move very slowly, and you heard some voices, from me ;) and I said Spikeeee!(investopedia Spike) in just 1 second! you see, all of your money gone in forex account! and get minus, because of Margin call! and I said Oooops ;) bad news is you forget to set stop loss for that trade!(risk management)

forex spike movement

you still don't believe what happen to your account, and then you ask why this happen to other trader that hangout with you! and he just said simple words i.e spike! and he said this kind of phenomena happen all the times after the fed or some central bank announce interest rate news! and then you ask your friends trader, how many lot that he bets for shorting eur/usd ? and he said, 001 lot! (good money management)

this tragedy, happen all the time! and this could happen to your account, if you not use money management and risk management wisely! I have to admit, its not easy to implement good money management and risk management all the times, such as small lot(money management), and use stop loss(risk management) in every trade that we make! the moral lesson of this tutorials is don't be to confident, and don't be greedy! remember sh1t happen in forex industry ;)

greedy people will get slaughter like a pig (soros quotation)

Ditulis oleh: Forex Trader ForexAbiz Updated at : 9:52 AM

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