Money Management Vs. Risk Management - Page 232
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Thread: Money Management Vs. Risk Management

  1. #1
    Registered user Ruhul Amin's Avatar
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    Red face Money Management Vs. Risk Management

    A good trader always follow money management you see. But one another thing is very important is risk management. Also some new trader do not understand the different between money management and risk management. So today, I will give some theory on this topic.

    Definition:
    Money Management Refer to you manage your money. How you spent, How many time, How long etc. Actually the divided of your time and profit is money management.

    On the other hand, we use risk management to divided our capital in some parts of amount. It also refer with %. Also we refer it, How much we want to gain against we take the risk.

    Main Idea:
    The main idea of Money Management is really very large. Actually It include all the thing of forex success. But Risk management is just a part on Money management.

    So we can say,
    Money Management = Risk Management + Timeframe + gain pips (price movement) + loss management.

    On the risk management theme, we can see, we take risk some % on our capital. Money management keep the risk on that % we make part from the amount of risk.

    Example:
    The proper method to describe money management and risk management is, how we control our money. Let’s see, we invest 1000$ in standard account. We take the 2% risk for one trade. That means we take 20$ risk for per trade. Now think about it, How much you want to gain against 20$. I think 30$ is good in ratio of 1:1.5 (Risk Return Ratio).

    I think now you clear about it because both are not same. Risk management comes before money management but it’s a part of money management also.

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  2. #2311
    Registered user sniper007's Avatar
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    Quote Originally Posted by Senorita View Post
    If we have to get better, we must understand that good money management will help give us the chance to make good profits in the right time. The chance of earning with the right management is very helpful and hence this is done we can see that our capital is well protected and managed. Good risk management is important and its likely something that we need to work on in order to develop something that we can earn from.
    And good money and risk management is not what we compare in a nutshell it is what we all have to make sure that we have good understanding for and then use it properly. Money management is the first most important one, when the trader has a good money management then a good simple risk management will follow.

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  3. #2312
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    Quote Originally Posted by sniper007 View Post
    And good money and risk management is not what we compare in a nutshell it is what we all have to make sure that we have good understanding for and then use it properly. Money management is the first most important one, when the trader has a good money management then a good simple risk management will follow.
    There is nothing pressing to differentiate between them, what is needed is we follow them with discipline and dont get carried away during trading. many times it so happens during trading that we get carried away due to greed and then due to big lots end up blowing our account. We have to be serious about the protection of our money and account otherwise we will not stay long in trading.

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  4. #2313
    Registered user sniper007's Avatar
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    Quote Originally Posted by komalam View Post
    There is nothing pressing to differentiate between them, what is needed is we follow them with discipline and dont get carried away during trading. many times it so happens during trading that we get carried away due to greed and then due to big lots end up blowing our account. We have to be serious about the protection of our money and account otherwise we will not stay long in trading.
    They all help us to protect our trading account and any one who is not making use of it, they are putting their trading account at risk big time. We can't be sure where the market is headed towards, but we can always get to protect our trading account even when we have made good analysis and all that. For you to become profitable trader you need not to alone have the trading strategy but also discipline to carry out the money management rules.

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