Especially in my early days I had to pay a lot of tuition for Forex trading. Beginners very often make the mistake of carelessly building positions so that one can at least hope.
However, this continues to degenerate into a “wild mess” because you no longer have yourself under control. After analyzing my investment behavior after various losses and continuing to acquire new knowledge about the Forex market, I first came across the term money management . As it turned out later, a decisive (!!!) turning point in my Forex career!
What is Money Management?
Simply make, this is a strategy to manage your Forex positions and awards skillfully. Because 90% of all traders lose money on the financial market in the long term and only about 10% are real winners on the foreign exchange market.
Today I would like to introduce you to the 80/20 method, which is an easy-to-use Forex Money Management strategy that will immediately limit your losses and maximize your Forex profits.
Also Read: Forex – 5 Golden Rules for More Profits!
Money Management – 80/20 method
At the beginning it is very important that we ask ourselves BEFORE opening a position, what profit expectation we have with the following Forex trade. For example, suppose we see a very good opportunity in a chart formation and our price target is +100 PIPs. The 80/20 method is split into 2 trades – our first target of the 1st position should now be +50 PIPs. It should also be mentioned that we should generally only risk a maximum of 1-3% of our bankroll per trade! Please stay absolutely consistent here, even if it is very difficult, think of your long-term profits!
Now let us assume that the exchange rate increases by +50 PIPs, now we make 80% of the whole position flat and the remaining 20% we let continue with a stop loss on the market. In many cases, the remaining 20% will generate even more profit than the larger 80% position we have already sold to secure our profit. You can of course freely choose the target of the 2nd position, but I recommend a trailing stop in Forex trading , in order to continue to be invested in the foreign exchange market as long as possible.
I hope I was able to help you with the 80/20 method and you have now discovered a suitable Forex Money Management strategy for you. Turn away from the wild fooling around, even if it is difficult, I know what I’m talking about. If you still have any questions, please feel free to contact me in my website or comment below.