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 tests 1.1800, closes in on a fresh two-month high
EUR/USD extends its gains for the second consecutive day on Tuesday and trades near 1.1800. The broad-based US Dollar weakness and a potential policy divergence between the European Central Bank and the Federal Reserve keep the bullish bias intact heading into the holiday season.
GBP/USD climbs above 1.3500 area, renews 11-week peak
GBP/USD extends its weekly rally and trades at its highest level since early October above 1.3500. The US Dollar remains under persistent bearish pressure heading into the Christmas break, while Pound traders largely brush off the latest interest rate cut from the Bank of England.
USD/JPY plunges to near 155.80 amid fragile US Dollar, Japan’s intervention call
USD/JPY plummets to near 155.80 as the US Dollar outperforms across the board. The Fed is expected to deliver at least two interest rate cuts in 2026. Japan’s FM Katayama warns against one-sided, excessive moves against the Yen.
Editors’ Picks
Gold approaches $4,500 as record-setting rally continues
Gold builds on Monday's impressive gains and advances toward $4,500, setting fresh record-highs along the way. Heightened geopolitical tensions, combined with the ongoing US Dollar (USD) selloff ahead of the Q3 GDP data, help XAU/USD preserve its bullish momentum.
EUR/USD tests 1.1800, closes in on a fresh two-month high
EUR/USD extends its gains for the second consecutive day on Tuesday and trades near 1.1800. The broad-based US Dollar weakness and a potential policy divergence between the European Central Bank and the Federal Reserve keep the bullish bias intact heading into the holiday season.
GBP/USD climbs above 1.3500 area, renews 11-week peak
GBP/USD extends its weekly rally and trades at its highest level since early October above 1.3500. The US Dollar remains under persistent bearish pressure heading into the Christmas break, while Pound traders largely brush off the latest interest rate cut from the Bank of England.
US GDP expected to highlight steady growth in Q3
The United States Bureau of Economic Analysis (BEA) will publish the first preliminary estimate of the third-quarter Gross Domestic Product on Tuesday, at 13:30 GMT. Analysts expect the data to show annualized growth of 3.2%, following the 3.8% expansion in the previous quarter.
Ten questions that matter going into 2026
2026 may be less about a neat “base case” and more about a regime shift—the market can reprice what matters most (growth, inflation, fiscal, geopolitics, concentration). The biggest trap is false comfort: the same trades can look defensive… right up until they become crowded.
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What Are the 10 Fatal Mistakes Traders Make
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The challenge: Timing the market and trader psychology
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