Here we will look at some money management techniques the pro traders use for bigger profits and if you incorporate them in your trading system, you will increase your profit potential while at the same, time decrease your risk.

There are many different ways to make money but a sure fire way to lose it is to let losses get out of control, so here are some money management tips the pro’s use which you can incorporate in your currency trading strategy for bigger profits.

Don’t Set Stops in Normal Volatility

Most new traders come into Forex trading, thinking they can win by placing stops of 10 – 30 pips and day trade but all they do is get stopped out and wonder why but the reason there stopped out is they have placed their strop in random volatility and that spells disaster. In today’s world of instant price delivery, day trading doesn’t work and all volatility in a day session is random.

Even on longer term trades, traders still want to take as little risk as possible and put stops to tight – understand this: If you want to make big gains, you have to give the market room to oscillate against you and by placing your stop further back, you will increase the odds of success – but how do you do this without taking to big a risk?

Don’t Put Stops Near Other Speculators

95% of speculators lose money and their stops always get picked off, so place your stop further back and take the view that, a lot of people will get stopped out before me, wait for most speculative stops to get picked off and you will have your stop far enough back, so your not taken out early.

The reason most traders have stops to close is because their leverage is to high. You can get 500:1 leverage but to use anywhere near this amount, means a stop has to be to close and you will lose. Instead, use lower leverage and place the stop further back, 10:1 leverage is plenty for most traders and believe me, you can make huge gains on this rather modest leverage. Don’t be greedy and try and make a fortune overnight – it’s not possible.

Use Time Stops

The real pro traders use time stops and a time stop is simple – if the trade doesn’t break the way you think in the specified period of time allocated, you cover the position.

How many times, do traders enter a break and the break stalls but they still wait and hope it moves in their favor, only to see the price recoil back against them? A lot of times so don’t take the risk, if a break occurs set a time stop and get out if it doesn’t follow through.

Monitor Overall Account Risk Not Single Trade Risk

Monitor the risk to all your trades individually and combined and look to cover trades on the market action as it appears to you in real time, not when you entered the trade. This will keep your view fresh and allow you to protect trades quicker.

If You Want to Win Don’t Follow the Herd

I have heard about placing tight stops, day trading and scalping is the best way to make money but its not and the ratio of losers shows this. I have also never see an amateur trader use a time stop or take enough of a risk to make as gain – so if you want to win, follow the above tips and you will increase your chances of joining the elite 5% of traders who make big gains and enjoy currency trading success.

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