Forex Money Management. Trade safe building stable gains

Money management is a way Forex traders control their money flow: literally IN or OUT of own pockets... Yes, it's simply the knowledge and skills on managing own Forex account.

There are several rules of good money management:

1. Risk only small percentage of a total account

Why is it so important?
The main idea of the whole trading process is to survive!
Survival is the first task, after which comes making the money.

One should clearly understand that good traders are, first of all, skillful survivors. Those who also have deep pockets can additionally sustain larger losses and continue trading under unfavorable conditions
because they are financially able to. For an ordinary trader, the skills of surviving become a vital "must know" requirement to keep own Forex trading accounts "alive" and be able to make profits on top.

Let's take a look at the example that shows a difference between risking a small percentage of capital and risking a larger one. In the worst case scenario with ten losing trades in a row the trading account will suffer this much:

Trades	Account balance	Risking 2% of total account per trade
1	Start — 5000	100
2	4900	98
3	4802	96
4	4706	94
5	4612	92
6	4520	90
7	4430	89
8	4341	87
9	4254	85
10	4169 — 17% of the account has been lost

Trades	Account balance	Risking 10% of a total account per trade
1	Start — 5000	500
2	4500	450
3	4050	405
4	3645	364
5	3281	328
6	2953	295
7	2658	265
8	2392	239
9	2153	215
10	1938 — over 60% of the account has been lost

Apparently, there is a big difference between risking 2% and 10% of the account balance per trade. A trader who has made 10 trades risking only 2%, under the worst conditions would lose only 17% of his 

initial investment. The same trader who had been exposing 10% of the balance per trade would end up losing over 60% of his initial investment. As you can see, this simple decision — a money management 

approach — can have serious consequences if misjudged.