Podcast:
In this video:
01:26 A good money management rule
03:46 Taking your time with your trading
07:43 5th birthday offer live between the 5th and 9th of May
Don’t break your own money management rules
Don’t break your own money management rules, because if you do, there are generally some fairly big consequences. Let me discuss that and lots more with you right now.
Hi Forex Traders. It’s Andrew Mitchem here, the Forex Trading Coach, and welcome to my latest weekly video and podcast. Today is Friday the 2nd of May, 2014, and it’s a non-farm payroll or non-farm employment day today. So probably not expecting a great deal of price action right now through the Asian session. Possibly not much in the European session until we get into the US session and that news release. On that subject also just to let you know that the market right now is very, very quiet. It’s not that easy to trade actually and the reports that I’ve read is that a lot of pairs, for instance the GBP/JPY, which usually moves a lot. A lot of pairs are at the lowest volume and the lowest daily range for seven years. So if you’re finding it tough right now, just hang in there and don’t worry too much about it. A lot of it could be due to the market conditions. But another thing it could be is to do with the topic of this video and podcast.
Don’t break your money management rules because if you do, the consequences are usually, they usually bite you actually so they usually get you in the end. That’s really important because I always have a rule for my own trading and I suggest for my clients, look at trading with this same rule. No more than half a percent or 0.5% of your account on any one trade.
A problem I find with a lot of people is they seem to think well because my account maybe quite small it means I can break that rule and risk a lot more. If you’ve got an account, let’s say $1,000 for example. That means you’re risking only $5 per trade; it’s still half of 1%. A lot of people think well that’s just silly. I can’t make money on that or look it’s only $5 therefore I’m going to go risk $50. I’m quite happy to risk $50 on this one trade. The problem being is that it doesn’t teach you discipline, it doesn’t teach you about good accurate money management. You see, if you’re risking $50 on a thousand dollars account, instead of 0.5% you’re actually risking 5% on that one trade, which is far too much.
It’s important to get into a routine and a discipline and treat your account regardless of its size, as if it were a huge account. Treat it as a professional trader would. A lot of people don’t realize that the way and the reason why people end up being professional traders and fund managers and things like that, and remain in the markets for over ten years like I have, is because I don’t break those rules and I do treat my trading seriously and I do treat it as a professional. So if your account is a thousand dollars, risk $5. If your account let’s say $10,000, risk $50 per trade. If your account is $100,000 risk $500 per trade. It’s the same risk and what that does is it gets you into the good discipline and good understanding of money management and risk. So just want to put that point across there. Don’t say, “I’ve just got a small account and I can afford to lose some money. I’m going to risk $50 or $500 if my account is only a thousand dollars.” It’s not the way for longevity within the Forex market. It gets you into a very bad state of mind also. So take that on board and absorb it because it’s a very valuable piece of information that can really help you.
Take your time
The other thing that I want to talk about is taking your time with your trading. Take your time on a day to day basis but also an advice I give to a lot of my clients is take your time going through the course.
