If you think that real-time charts and market news are the biggest hurdles before you while trading forex, you will be surprised to know that it is money management that is the "real" hurdle. In the world of foreign exchange trading, traders can enhance their chances of success with a good trading system and reliable broker but most find it difficult to manage their finances at the end of the month and this is all because of a poor money management strategy.
Before we read any further, it is important for all of us to note that money management can be made simple with a few tips and precautions. Things can be best executed when a forex trader makes efforts from the very initial stages of live forex trading. It is highly recommended that you don't put more than 2-3 percent of your money in trading so that a loss of series of losses don't turn you down for always, especially when you forget to set the stop loss. This will also safeguard you against the potential fears and over-confidence feelings that most traders find it hard to handle.
It is highly recommended that you should open a live trading account with $400-$500 if you have only $20,000-$25,000, particularly if you are entering live trading for the first time. The basics of forex trading, starting with the least and avoiding bankruptcy at all times, are to be considered even before live trading and account opening and should always be remembered. If a forex broker has offered you a leverage of more than 1:200, it is recommended that you stay at 1:200 as you will put more money at stake when actually that is just not required. A leverage of 1:100 is more than good and 1:200 should be more than enough unless you have "extra" money and you don't mind losing it all. Even if you have "extra" capital, which you don't care about, it is recommended that you use it diligently after carefully evaluating the pros and cons of a particular trade
The next thing that you should emphasize upon is when the right time to take a position is and it is highly recommended that you don't risk more than 2 percent of your available capital. This is primarily because a successful trader never puts everything at his disposal at stake and should always think positively but not over-ambitiously. You can even opt for splitting your trading position into two or more parts and assign a different target for each of the parts. Each of the targets should be of 100 pips, this will help you avoid losses and maximize profits without risking too much. The point to be conveyed is that a forex trader (no exceptions) should always try to make profits and maximize them but not at the risk of his entire capital as a loss or series of losses can actually put an end to his forex career.
We hope that these tips and precautions in context to forex trading and money management were useful to you in more than just a way.