Forex Trading - Money Management Secret (part 2)
After all, you can't just hold one trade size indefinitely.
When do you adjust your risk per trade? If you never adjust it, your risk per trade will probably become much too large or too small eventually.
Here is the rule of thumb.
If your account is between $1000 and $10,000. At this stage, only readjust your risk per trade once you've increased your account by 50% or decreased it by 20%. Then once you've readjusted it, do not readjust it until your account grows by 50% or decreases by 20%.
If your account is between $10,000 and $100,000. At this stage, only readjust your risk per trade once you've increase your account by 40% or decreased it by 20%. Then once you've readjusted it, do not readjust it until your account grows by 40% or decreases by 20%.
If your account is above $100,000. At this stage, risk only 1% of your account per trade. Only readjust your risk per trade once you've increase your account by 30% or decreased it by 20%. Then once you've readjusted it, do not readjust it until your account grows by 30% or decreases by 20%.
Now, if you're trading an account under $1000, you need to be trading micro lots. Just knock a zero off of all the numbers above and you have your money management rules.
For example, If your account is between $100 and $1000. At this stage, only readjust your risk per trade once you've increased your account by 50% or decreased it by 20%. Then once you've readjusted it, do not readjust it until your account grows by 50% or decreases by 20%.
Related Tags: forex trading, money management
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Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive GuideYour Article Search Directory : Find in Articles
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