Proper money management in market trading means getting to the point, where you trade with market money, not your own savings.
That actually means increasing the amount of your money with dynamic management, so that you no longer need to spend from your principal amount.
Follow up to learn the simplest and most accurate exit strategy.
What is money management?
Money management means:
Maintaining and growing money by investing – using money to make more money.
In some cases, investing may end up with losing the whole amount or a part of it. This possibility is known as investment risk.
Let’s consider an example to fully understand all these aspects.
Suppose you are a professional painter and you have $3,000. You want to buy a product worth $10,000.
Your intention is to grow your money using the skills you have in art.
Suppose you have a plan and act on your investment growth plan.
So far, you have decided to invest in order to grow your money.
The main question is:
What if you spent all of your money on advertising, yet no one would buy your painting?
This is what we mean by investment risk – the very possibility to lose your money.
Hence, it turns out that if you do not manage your money and risk the entire investment, you may face heavy losses.
Join us to learn the basics of money management.
How to manage your money and trade with money made in the market?
Market money is a systematic profit from the trades and it is constantly growing.
Suppose you have $40,000 to invest in financial markets.
This amount is mentioned as an example and is intended for easy calculations. You do not have to enter the market with exactly same amount of money.
As you can see in the picture, this $40,000 is divided into four $10,000 parts in the next row.
This means that according to this strategy, you divide your money into 4 equal parts. In the next step, you use the first part of it, which is $10,000 here.
If you lose in the market, how much of your money will be lost in the worst case?
In the first step, you have made $10,000 in your trading account and now you decide to test your trading strategy and see if it really works, and if you are sure to add everything right to your investment in the next step.
Your task in the first step is to start trading with this $10,000 and if 10% of this part of the money is lost for any reason, stop trading and look for a solution.
For how long?
You should not trade until you find the reason for your mistake in trading. You can continue again after you realized what the cause for the loss was.
If, for any reason, you lose another 5% of your money,
You should get the remaining $8,500 out of the brokerage and put in your bank account, so that even if you are tempted to trade, there is no money in your account to do so.
You lost 15% of the first $10,000 at this point, and this needs to be pursued closely.
Get help from experts to find and solve the problem. They will explain what strategy to use in the market and how to get the best solutions.
Suppose that after much searching you realize your mistake and become fully prepared to test what you have learned in the market.
Use the second $10,000 this time and do same as before: when 10% of this amount is lost, stop trading and look for the reason, and when the other 5% is lost again, take all of your money out of the brokerage and look for a solution with more effort and seriousness. .
Do the same for the third and the fourth $10,000. According to this strategy, if you lose 15% of all 4 parts, your total amount (that is the initial $40,000) will decrease on 15% only in the worst case. After testing the same conditions for 8 times and having much more experience than before, you will still have $34,000 left. In such a situation, many people lose the whole amount just because they do not use this simple approach to money management and enter the infinite cycle of losing.
What strategy should you follow, if you make profit? Look at the picture below:
You invest $10,000 in the market and grow your investment by 20% using the right trading strategy and exit strategy.
Now your amount is $12,000. As a reward for this success, you can take 20% of the second $10,000 from your bank account and add it to the $12,000 you have in your trading account to reach $14,000.
You can reach your financial goals much faster and use the compound effect principle.
In the next step, you have $14,000 and if you grow it by 20% again, take 20% from your bank account from the second $10,000 which is now $8,000 and add it to your trading account, to make it $16,800.
If you follow this for another 8 steps, you will end up with about $40,000 in your trading account.
In this case, you started trading with $10,000 and deposited $10,000 into your account gradually in 4 steps according to your trading strategy. It means that you invested $20,000 of that initial $40,000 in the market, now you have $20,000 in your bank account and $40,000 in your trading account.
At this point, you can easily withdraw $20,000 from your trading account and deposit it into your bank account.
Hence, your bank balance will be $40,000 and your trading account balance will be $20,000. However, you do have $10,000 more now, than you had when started. Therefore, from now on you can proudly trade with the market money.
What is the trading strategy that can really help you easily make 20% profit? How can you get in touch with the professionals, who can supervise and support you in solving the issues you face in trading?
We will show you this strategy in the following video
We tried to show you how to easily grow your investment in the stock market, currency pairs, cryptocurrencies and any other market.
However, there are 2 necessary things on the way to achieving this.
The first thing is a good trading strategy, and we do recommend Price Action.
The second one is professional support of the specialized coaches, who would support you on this path at all times.
With Price Action, you will reach to such a level of trading skills that you no longer need any other special method to find the best trading positions and make profit from them.
This training is completely free and you can get it with AhmadReza Jabalameli and his 17 years of experience in all kinds of financial markets through the link that is placed below.
Start Jabalameli Price Action Trading Course now with a free download!
Please watch the video below to fully understand how to get in touch with coaches and experts in the field of trading.