How to Manage Money and Risk

Money Management risk

Developing the ability to manage money and risk is vital to novice retail traders who wish to experience profitability within their first year of trading. By having clear processes to manage those factors, traders are demonstrating that they are taking trading seriously, and as such often become successful. This is something which I have witnessed over many years of teaching Forex.

I’ve also witnessed the other side of the spectrum. Traders that don’t develop clear strategies for managing their capital and the uncertainty that trading can bring nearly always fall short. But it doesn’t have to be this way. There are simple steps every beginner can take to increase their chances of profitability over their first twelve months.

Think of Forex trading like a business

Treating Forex trading like a business is exceptionally important. A mindset of professionalism is central to creating the foundations of success, and it’s something I encourage all novice traders to adopt. When trading is treated like a part-time hobby, the results will almost always match the approach.

Many hope to get rich from Forex quickly. Unfortunately, it doesn’t quite work that way. Trading through technical analysis is a skill that needs to be mastered over time. It takes dedicated practice and a willingness to learn. I often compare it to learning a language or musical instrument. Fantastic progress can be made within a year, but it takes the right approach.

So how does one treat Forex like a business? The first step is to treat your time like a commodity. It must be dedicated to understanding a number of key concepts. Creating a consistent trading routine is also very important. Dedicate the same amount of time to learning and trading each day. Most traders I speak to actually do this to some degree when it comes to learning how price moves, or how a particular trading strategy works. A lower proportion invest time in creating a money and risk management plan, which is an absolute necessity for profitable trading.