Trading the forex market without safeguards can be like skydiving without a parachute. Anyone serious enough about trading would do well to incorporate money management techniques to their trading plan to protect their portfolio. Nearly all successful traders use a money management strategy along with their regular trading plan, and if you have ever experienced a severe drawdown on your account, you probably do too. Basically, having safeguards in place to protect your account to remain in business is far better than the alternative. What follows are some general guidelines for money management which can be incorporated into a trading plan.
Tip #1: Only Trade With Risk Capital
Tip #2: Cut Losses Short, Let Profits Run On
Tip #3: Avoid Using Too Much Leverage
Tip #4: Avoid Taking Too Much Heat
Tip #5: Do Not Give in to Greed
Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.