Guest post #1 Money Management

Since I only know what I know, I have invited some other seasoned traders to share some of what they have learned over the years as well. I hope that you will find these posting helpful. As always take it slow, be patient and exercise discipline.

Subject: Money management

Hi Traders Friend,

I'll focus this post on money management which is one of the most important parts of trading. The first rule of money management is to preserve your capital. Simply stated, be patient and wait for a good setup according to your own strategy.

Professional traders only risk between 1% to 3% per trade. I personally risk 2% per trade. So how can you determine your risk and keep it between 1% to 3%? I personally use a website calculator at:;

You can pay for a calculator that you can download but the good ones cost about $ 100. Or you can use a free one on a web page. The choice is yours.

You need to know how many PIPs you may have to loose in order for the trade to be invalidated. This depends on your level of tolerance, your trading style, and your trading system. That is another lesson in itself so let's just stick to the task on hand. :)

So let's say you have $ 2,500 in your account and your risk for the trade is 50 PIPs. If you risk 2% of your account for the trade you can only trade one mini lot for that trade. If your risk for the trade is 25 PIPs with the same amount of capital than you would be able to trade 2 mini lots.

If you only made 25 PIPs per week profit, in less than a year you will double your account. Just 25 PIPs per week. You don't have to hit "home runs" every time to grow your account in a substantial way. Nor do you need to risk a large amount for every trade to grow it substantially either.

By keeping your risk low, when you get on a loosing streak (also called a draw down) you can take quite a few hits in a row and not do severe damage to your account and to your trading psychology. Every person and every trading system has draw downs. George Soros and Warren Buffett have had plenty of draw downs, but they keep their risks low and are still Billionaires.

I hope this quick post helps you to start understanding the basic principles of money management.


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This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.


  1. Thank you for the invite, TRADERSFRIEND! Recognize the objective and act accordingly. Preserve wealth, drill and rehearse, find a better way to trade. Under no circumstances do you ever truly give up FOREX. Need help, find it. They're are plenty advisers to help manage your money; are you one of them?

  2. Hi ,
    gypsy here.... ;)
    yes what you say is true..and we all went broke at one time or another,but if your still trading ,chances are you learned that valuable lesson of money management,,one thing I want to point out that is just important and goes hand in hand with money management is over trading....even if you have the best mm skills ,if you over trade chances are ,your still going to end up broke as the day you were time goes on ..I will share more with this blog..for now MM and over trading should be the subject of the day..
    Have a wonderful evening,and good luck in your trades......