It is always said that money management is important in FX. Of course, stocks other than FX are the same because of investment behavior. The reason why money management is not possible is that most traders want to make more money, so they trade in large amounts that don’t match the money, and have a wrong loss cut point.
Regarding the fund management, in the instruction book on FX and information sites, it is written such as “Set loss cut setting to XXpips”. However, it is very dangerous to set the loss cut setting with a fixed number of pips ignoring the account balance and the number of transactions.
For the money, you can invest in, be sure to determine the allowable loss for each trade. In other words, it is important to determine the percentage of loss cut and calculate the number of trades accordingly.
To calculate this, the basic formula is account balance x allowable loss rate = optimal number of lots x loss cut width. It is important to set your account balance as low as possible, such as the margin amount you have deposited and the allowable loss rate of 5% or less. On the other hand, if the value range up to the loss cut point set on the chart is known, the optimum number of lots is automatically calculated.
In other words, account balance x allowable loss rate ÷ loss cut width = an optimum number of lots. There are many people who have started FX, paying attention to the method of entry and profit margins, and tempering money management.
The key to investing is to continue to win with less loss than winning big at once. There are various ways of thinking about money management, but you should also know as the knowledge that you can safely manage your assets with this way of thinking.