In Forex, one of the worst things you can do is to risk money that you can’t afford to lose. There’s no point being impatient in your pursuit of big Forex trading profits, because the end result is always regret and disappointment. If you’re serious about growing a large Forex trading income, then you must apply a good Forex money management strategy. By the end of this article, you’ll learn one of the best Forex money management strategies around.
Don’t Bet The Farm If You Want To Be Profitable Long Term
So you’ve got a profitable Forex trading system that brings in money like clockwork. It’s time to really crank up the risk, perhaps even borrow some money to accelerate your Forex trading profits even more, right? After all, it’s been profiting steadily up till now, so what could possibly go wrong? Well, to tell you the truth, there are a lot of things that can go “wrong” with a profitable Forex trading system when you risk more than you can afford.
As Murphy’s law will have it each and every time, the moment when you feel the most confident about your system is the point where your system has the most chances of having a string of losses. If you invest a big sum at this point, you risk catching that streak and losing a lot of money that you can’t afford to lose. Moreover, you will be less inclined to ride out the losses because now you’re afraid of the consequences of losing this money. Fear will take over, and there’s nothing worse than fear to kill a profitable Forex trading system. You’ll start second guessing trades, shut down your system at the worst possible time, and potentially even give up on a perfectly profitable Forex trading system prematurely.
The Best Forex Money Management Strategy
Instead of adopting an all or nothing approach, there is a solid way of increasing your capital and your profits without betting the farm, and that’s by progressive reinvestments and allowing your profits to compound. Progressive reinvestment means that you consistently add a fixed amount of new capital into your trading account each month, which means that you’re less likely to be affected by an “unlucky” streak because of the law of averages. As you grow your capital, you will grow your profits as well, and that’s where reinvesting your profits comes in.
At the start, when your capital base is small, your profits will hardly be worth withdrawing from your account. You’re much better off leaving your Forex trading profits in there to compound, so that they will birth more profits in the following months. I’m sure you know the power behind compounding, and because Forex trading profits are typically much higher than standard investment vehicles, you’ll have much more accelerated compounding happening for you. With the reinvestments and compounding working together, you’ll achieve your Forex financial freedom goal in no time!
Patience is a virtue, and nowhere is that more true than in Forex. Your capital is by far your most precious commodity, and you owe it to yourself to stay safe in the market so that you can capture your profitable Forex trading systems full potential. So don’t get impatient and risk more money than you can afford to lose, but instead stay in the game and let the best Forex money management strategy work its magic for you.