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CAPITAL MANAGEMENT
Capital management is the most vital factor to consider gaining consistent profit in the forex market. It
helps to determine the amount of capital to risk in a single trade and how much to profit.
Forex has the risk of losing the entire capital. 70% - 80% of retail investors lose money in the currency
market (Forex Ninja, 2019). One should never invest the money one cannot bear to lose. Protecting the
capital is the main duty of a trader. Profits come with experience, knowledge, and skills the trader
gain. It takes years for a trader to become professional and to gain these skills. (Gregory Mittel, 14-
15). It is always better to risk only 1-2% of the capital on every single trade.
The risk on each trade should be a small amount of the total capital. Only a small percentage of the to-
tal amount of capital should be risked on each of the trades executed. 2% of the total amount of capital
should be risked for executing the trade. For e.g with 3000 euros capital, more than 2% of the capital
should not be risked in a single trade. With this limit, the maximum loss in a single trade should not
exceed 60 euros. (Selwyn M. Gishen, 2020).
A good trading plan is required for a trader in any market. Traders should never let their decision be
controlled by emotions. Successful forex traders grab few big wins while experiencing smaller losses.
Patience is the key quality required for a trader along with the discipline to follow his trading rules.
Consecutive losses can be emotionally difficult for traders to control their patience in trading. Traders
must not trade against the market and trigger position because of fear and greed the market as this can
completely wipe out his whole capital. (Robert Stammers, 2021).
Trading forex does not make wealthy overnight. Every trader will face losses in their trade. Capital and
risk management should be equally focused by traders as they focus on developing their strategy.
Learning from mistakes and from the experience of professional traders is the most successful way to
learn a good way to trade the forex market. (Robert Stammers, 2021). Traders must stick to their trad-
ing strategy and plan even after continuous losses. The main skill a professional and experienced trader
have is the control of their emotions. They have a trading plan, and they rarely change their plan even
if they encounter a lot of losses. Emotions should be thrown away during the trade and habits must be
developed to learn from the mistakes.
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