When you want to learn Money Management, getting a Forex Demo Account is the ideal method.
Forex Money Management
Simply speaking, money management is all about the risk that you want to put on your account on a single trade. You can find different things on the Internet like the way to manage money in forex. And, there are different methods of doing it. Here you will not be taken to a ride into the different methods of money management, but it is crucial that you learn and follow the rules given here.
Most traders skip this aspect of forex trading. When entering a new deal, the number of pips risked is given attention, but not the related aspect of the account that can be lost.
If you are a smart trader, you would not risk more than 1% of your account for each time. And, this means that even continuous loses will not vaporize your account.
Psychology and Money Management
Fear: When a trader deals with a live account, there is a fear of reaching the stop loss, and this causes him to give no attention to money management and he simply sticks to a stop loss and risks excessive amount of money. And, there are some traders who don’t even put a stop loss.
Greed: The rules of money management are again broken when the trader out of greed looks only at the profitable trade and makes a big trade, and doesn’t limit the stop loss.
There is not much value to the difference in psychological aspects between forex, because money management takes place whenever the trader is without some open position. When the trader is not in the market, the account status is obvious, and it becomes easy for the trader to match the coming trade with the rules of money management.
When trading with a forex demo account, the money is not for real. This means that there is going to be some psychological variance. However, because the trade is not open, in which case the emotions would have been stronger, this difference is not significant.
Forex Demo Account
When you have a forex demo account, it becomes easier to control both the emotions of fear and greed. When you are not trading using a real account, there is a shortage of strong emotions, which means that traders find it easier to manage their money. But, when a trader starts using a real account, the rules generally do hold.
When you are trying to learn and practice money management, you need to consider a few crucial things:
? Make use of the actual deposit sum: Create your forex demo account using a sum that you actually want with your real account. Generally, your demo account is added with a deposit amount by the broker. And, it is easy to change this amount because it is not real. Hence, you can get the broker to deposit a sum that you actually want your real account to be. It is always a better option to practice with the real sum than using some other default amount. So, you would able to realize your actual future trading through your forex demo account.
? Adhere to the rules: Before you enter into real trading, without concern for the rules being used, it is most important that you adhere to the money management rules from the very beginning. This is because you need to practice it before you move to a real account where emotions can make you lead to some slips. But, when you have practiced and trained yourself, this wouldn’t occur much. Thus, a forex demo account can teach you lots of good things.