Training for Traders: How to Increase Your Trading

Profits Through Smart Money Management Techniques

By: Marcello Ducille

From: http://smartpassiverevenue.com/

Most Forex traders only think about how much money

they will make but only a few think about how much

money they are risking and could lose. Money

management is definitely the number one element that

every profitable trading strategy possesses.

When you fail to apply risk control rules to your trading

you are lowering your possibilities to ever becoming a

highly profitable trader. In this article I will be covering

some of the most important and effective money management techniques that I use on my daily

trading.

Use trailing stops to lock some of the profits: A trailing stop is similar to a regular stop loss

with the only difference that a trailing stop will move as price fluctuates.

A trailing stop can help you to protect your account against unexpected market movements and

to protect part of the profits while you are still in the market.

There are different types of trailing stops, some trading platforms allow you to use a pip based

trailing stop, some others allow you to use a bar based trailing stop, and some even a percentage

based trailing stop.

Never forget to use stop losses: I strongly believe that stop losses are the most important part of

your trading strategy. A trader that doesn’t use stop losses is exposing himself and his account to

total chaos and ruin.

I have heard of thousands of Forex traders who disrespect risk and start to trade without a stop

loss order and end up losing most or all of their trading funds.

No one likes to lose but you should always be ready for the unexpectable and your stop loss is

your insurance that you will not blow up your trading account.

Only take trades with high win to reward ratios: A risk of reward ratio is the measurement of

the expect returns divided by the amount of pips or money at risk. For instance, if you are

expecting to make $100 and you are risking $50, that’s a 2:1 ratio.

The best trades always have high risk to reward ratios, this is why is a good practice to only take

trades that have high risk to reward ratios.

Only use trading strategies that have a well defined set of risk management rules: There are

many trading systems out there that provide you with backtesting reports and tell you that the

systems can double your money every month.

The truth is that the only reason why they are able to produce this “amazing” results is because

they normally don’t use any stop losses or money management! This of course increases the

profits but it also increases the risk exponentially.

This is why is not a good idea to waste any time with a trading system that doesn’t use proper

risk management. Remember, professional traders understand and respect risk they don’t try to

eliminate it.

Don’t take sporadic or impulsive trades: Taking impulsive trading is one of the quickest ways

to blow up your trading account. Impulsive trades are any trades that are entered without a plan

or a strategy in mind.

There is a big difference between taking impulsive trades and taking discretionary trades. The

discretionary trader has a plan that he follows to the letter, the impulsive trader is just shooting in

the dark.

Forex trading requires lots of dedication and patience and to increase your profits you need to

increase your abilities as a trader. Check back soon as we will be publishing more useful articles

in here.

To your success,

Marcello Ducille

Professional Online Entrepreneur/Senior Forex Trader

Learn how to build an online business and earn a 6 or even 7 figure

income with these simple secret wealth building techniques. Learn more

at: http://thebuildwealthplan.com/