Money Management System
Money has its own rules that differs from trading rules and any other parameters that might appear in your trading journal, due that fact and considering as well that capital is hard to come by especially in Zimbabwe money must be handled with caution. Capital must be protected and profits must be secured. Money charms people to risk insanely because money is money ,when it starts coming in people quickly get over the rainbow and in that moment it finishes in a split of a second a trader like you can lose the whole lumpsum he had spend days and days accumulating. This article will dwell much on protecting managing and growing money that is in your trading account.
What is money management
Forex money management is a set of processes that a forex trader will use to manage the money in their forex trading account, in general terms it is the processes of budgeting, saving, investing, spending, or otherwise overseeing the capital usage of an individual or group.
General Management tactics
You have to define your risk using position size, you have to outline your amount drawdowns for all trades once you reach that limit, set back and reorganize. There is need to use stop losses and take profits to exit your trades or open positions. Clearly define your reward ratios and always aim to break even and make profits. Forex trading is not all about the market data and technicalities but its also money management that makes good traders.
components of the Management system
All trades must be executed in a consistent manner meaning there is policies, rules and procedures which have been established to address similar types of future trades in a routine manner.
Time is an important factor to consider in your management system, they say time is money so all trades must be handled within a reasonable period of time consistent with time frames outlined in the trading plan and MM system.
There must be a reason for the trade and the transaction be it a deposit or withdrawal which should be in the best interest of your overall goals, and and the transactions must be working towards your profits.
Money management is made easy when every transaction is well documented, so there must be sufficient documentation to support the transaction made over a review period and the documentation must be retained, organized, and complete enough to stand up to an audit.
When you manage your Trading like business then there must be some certification on all transactions if your trades are being managed by third parties you must be the signatory of all transaction it brings accountability and order.