Isn’t money management a nice buzzword? Many forex brokers flash around this nice phrase. I’m sure you’ve heard it many times. How can you turn this buzzword into practical, actionable advice?
As with any type of investment, there is risk. The idea is to control your risk and be aware of it. This will save you from the infamous margin call, as well as let you control your account in a better way.
1. Limit the risk: When you open a trade, place a stop loss order to get you out of your trade and prevent a situation where you lose too much. This states the obvious for the vast majority of traders reading this, but I still know some traders who don’t use a stop loss order. This precarious deed is done also by people who work at forex broker firms and trade with their account. Sad but true.
2. How much money are you risking: Many traders calculate the risk / reward ratio. Some look for 2:1 or 3:1. That’s great. But how many dollars are you actually risking? This data is available with most brokers. Is this sum too high? In that case, there are two mathematical options to reduce the amount of money you risk:
A rule of thumb: Don’t risk more than 2% of your account!
I know this sounds very strict, but this rule will help you survive, learn and eventually increase your chances of having sustainable profits in forex trading.
A forex demo account is very useful for practice, but it doesn’t fully simulate the real thing – not in execution (detailed later) and not in the emotional stress. Having enough opportunities to trade helps you trade better.
----
Read chapter 2
As with any type of investment, there is risk. The idea is to control your risk and be aware of it. This will save you from the infamous margin call, as well as let you control your account in a better way.
1. Limit the risk: When you open a trade, place a stop loss order to get you out of your trade and prevent a situation where you lose too much. This states the obvious for the vast majority of traders reading this, but I still know some traders who don’t use a stop loss order. This precarious deed is done also by people who work at forex broker firms and trade with their account. Sad but true.
2. How much money are you risking: Many traders calculate the risk / reward ratio. Some look for 2:1 or 3:1. That’s great. But how many dollars are you actually risking? This data is available with most brokers. Is this sum too high? In that case, there are two mathematical options to reduce the amount of money you risk:
1. Tighten your Stop Loss: In this way, less money is at risk. Sounds good? Not exactly. Perhaps your new Stop Loss is too tight and will yield an immediate loss to that position. Lowering the amount of money you risk doesn’t mean raising the chances of a loss! The stop loss point should be based on your analysis: technical, fundamental or a combination. It shouldn’t be based on the amount of money risked.
2. Lowering the position size: With a lower position size, you will still get to place the stop loss point in the right place for you, but the money that is risked will be lower. Yes, also the rewards side will be lower. And yes, it is tempting to trade large positions. But remember: this is leveraged money, not real money that you have. By lowering the position size you still get to trade your position in full, and just risk less cash.
3. How much of your account are you risking? OK, you already see the amount of dollars that you are risking, but saying it bluntly: what is your burn rate? Let’s say you have an account of $1000 and you risk 20%. Now your first trade has gone bad, and you lose $200. You stick to your method but it doesn’t work out again and you lose another $200. In 5 trades you are out, liquidated, margin-called. If you are new to forex trading, you are likely to make more mistakes and lose more in your initial trades. Risking a big portion of your account means that you can burn out quickly before you had enough time to learn, improve and win enough trades.
A rule of thumb: Don’t risk more than 2% of your account!
I know this sounds very strict, but this rule will help you survive, learn and eventually increase your chances of having sustainable profits in forex trading.
A forex demo account is very useful for practice, but it doesn’t fully simulate the real thing – not in execution (detailed later) and not in the emotional stress. Having enough opportunities to trade helps you trade better.
----
Read chapter 2
Editors’ Picks
EUR/USD posts modest gains above 1.1700 as ECB signals pause
The EUR/USD pair posts modest gains around 1.1710 during the early Asian session on Monday. The Euro strengthens against the Greenback after the European Central Bank left its policy rates unchanged and took a more positive view on the Eurozone economy, which has shown resilience to global trade shocks. Financial markets are likely to remain subdued as traders book profits ahead of the long holiday period.
GBP/USD gains ground near 1.3400 ahead of UK Q3 GDP data
GBP/USD gains ground after three days of losses, trading around 1.3390 during the Asian hours on Monday. The pair depreciates as the Pound Sterling holds ground ahead of the release of the United Kingdom Gross Domestic Product for the third quarter.
USD/JPY drops below 157.50 as Yen recovers BoJ-led losses
USD/JPY loses ground and drops below 157.50 in the Asian session on Monday. The Japanese Yen recovers the BoJ's expected rate hike decision-led losses amid a minor US Dollar uptick and a risk-on market mood.
Editors’ Picks
Gold refreshes record highs, eyes $4,400 amid renewed geopolitical tensions
Gold is closing in on $4,400 early Monday, renewing lifetime highs, helped by renewed geopolitical tensions. Israel-Iran conflict and US-Venezuela headlines drive investors toward the traditional store of value, Gold.
AUD/USD grinds higher above 0.6600 after PBOC's status quo
AUD/USD is grinding higher above 0.6600 in Monday's Asian trading. The pair cheers an upbeat market mood and a hawkish RBA monetary policy outlook for 2026. The PBOC's no rate change decision seems to have little impact on the pair as a holiday-shortened week kicks in.
USD/JPY drops below 157.50 as Yen recovers BoJ-led losses
USD/JPY loses ground and drops below 157.50 in the Asian session on Monday. The Japanese Yen recovers the BoJ's expected rate hike decision-led losses amid a minor US Dollar uptick and a risk-on market mood.
Week ahead: Key risks to watch in last days of 2025 and early 2026
The festive period officially starts next week, with many traders vacating their desks until the first full week of January, making way for thin trading volumes and very few top-tier releases.
De-dollarisation by design: Gold’s partner in the new system
You don’t need another 2008 for the system to reset. You just need enough nations to stop settling trade in dollars. And that’s already happening. "If gold is the anchor, what actually moves value in a post-dollar world?” It’s a question most gold investors overlook. We think in terms of storage and preservation, but in the new rails being built, settlement speed matters just as much as soundness of money.
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