Money management in trading is needed by everyone. Money management is the management of funds in trading. That includes how much money you put in each transaction. The first problem that is often faced by traders, especially beginners, is losses.

Many traders think that the loss is due to a lack of quality strategy or analysis used so it doesn't help much. In fact, it could be that the cause of the loss is from poor money management or money management.

Money management is a trader's strategy in managing capital in both buying and selling positions when trading pairs. One of the concepts of money management, don't put all your eggs in one basket. You will not know when the market is volatile and down.

Even though it has been properly analyzed, no one can predict when the market will rise or fall. Didimax forex broker can teach you how to manage your funding. When a trader has money management, they will be able to manage the allocation of the funds he has.

Money management lets traders know how much funds should be spent when trading, how much funds they have, and what percentage should be allocated to buy, take profit, cut loss, or average down, to reduce the risk of losses and running out of money.

Money Management in Trading Must Always Pay Attention to Risk

The amount of risk in each transaction is always measured by the value of money. Usually, it is often determined as a percentage of the capital or balance in your trading account. There is no fixed rule regarding the amount of loss in a trading position.

Everything depends on each individual's financial condition. However, use funds that really won't be used shortly, don't use daily funds for trading. The best forex broker will help and guide you to make the right trading plan.

You can also assume that the allocation of funds for trading is funds that are ready to be lost so that your emotional state is not chaotic when trading and reduces the risk of excessive stress when you experience losses in trading.

However, some professional traders whose main income is from trading, rarely risk more than 3% of their total capital. There are also experienced traders who recommend the amount of risk between 3% - 5%. But, whatever it is, you have to feel comfortable, so you can trade in peace.

Money Management in Trading Helps Manage Funds to the Maximum

The lot size is also known as volume or some call it a quantity. Well, how to determine trading volume based on risk which is also known as position sizing. You have to think about the risks before deciding how much do you want to open position. 

So, if there are 2 traders with different capital but applying the same risk percentage and stop loss, then the lot size of the two is different. For traders who have larger capital, the trading volume is also larger even though the stop loss (risk in pips) is the same for both.

The risk/reward ratio is the ratio between the amount of risk (stop loss) and the amount of the target profit (reward) that is set. The next step to determine money management in trading is to set the desired profit target and then compare it with the predetermined risk.

There is no standard rule on how to set profit targets. However, we must be objective and realistic under market conditions at that time. Usually, experienced traders will suggest that the risk/reward should be at least 1:2. So, if your stop-loss is 50 pips, then the minimum profit target should be 100 pips.

Emotion Control is the Most Important Key to Money Management in Trading

Not only expertise in strategizing and price analysis is needed in trading, but also good money management skills to be able to control emotions. Emotional involvement is something that can greatly affect trading conditions.

Likewise, money management is not just setting money management, but also needs to make money management that can calm emotions. By understanding and implementing good money management, traders can avoid the risk of margin calls.

It's useless if you have good money management but do not fully master the trading strategy so you are always in doubt in opening a position. If so, no matter how good your money management is, the results will not be optimal.

So, money management is an important factor in trading that is closely related to risk control. As a professional trader, it is mandatory for you to apply money management in trading with good and perfect guidance.