Money Management Vs. Risk Management - Page 4
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Thread: Money Management Vs. Risk Management

  1. #1
    Trader 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. #31
    Trader amjad23510's Avatar
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    Quote Originally Posted by shivanandfx View Post
    These are really good explanation for the terms you gave sir. Each time a trader has an open position then risk is involved. The only time a trader is not exposed to any risk until he places a trade. The business simply thrives with good risk management,because risk is there all the way. Also it is always wise to diversify our investments between options we know are good.
    money management and risk management both are very important in this business.we can not leave any one.risk is important part of business because we can not earn without take risk.
    money management is next important thing because it enables a trader to survive in the field.we should have some money in reserve to have our side secure in such a risky forex trading business.

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  3. #32
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    I think that the trading depend on the way of the management we use . In my opinion the risk management is a part of the risk management . and we have to be experienced in the two types of the management . in order to be successful in the trading we need to be very careful to the balance and the general fund while the trading .

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  4. #33
    Trader techboy's Avatar
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    Quote Originally Posted by amjad23510 View Post
    money management and risk management both are very important in this business.we can not leave any one.risk is important part of business because we can not earn without take risk.
    money management is next important thing because it enables a trader to survive in the field.we should have some money in reserve to have our side secure in such a risky forex trading business.
    Right, both are important in trading, but we need also profitable strategies in our trading so that we can be profitable in our trading, capital preservation is as equally important as making profits so we must always give importance to both, we must acquire the right knowledge and experience to succeed in our trading.

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    " Trading is 70% Psychology, 15% Risk Management and 15% Strategy ! "

  5. #34
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    There is a very thin line between the money and risk management and hence most of the times both of these goes hand in hand when we are trading in this highky risky forex market. For one to excel in the forex trading business it is very much neccesary that they implement right money and risk management in their each and every trade executed.

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  6. #35
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    Quote Originally Posted by hosny55 View Post
    I think that the trading depend on the way of the management we use . In my opinion the risk management is a part of the risk management . and we have to be experienced in the two types of the management . in order to be successful in the trading we need to be very careful to the balance and the general fund while the trading .
    Risk management is the part of risk management? What do you mean by this sir? I think you are talking about risk management and money management, and yes both of them are very important to use in trading. Money management is the selection of our lot size for each trade, and risk management is the selection of risk for each trade.

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  7. #36
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    Quote Originally Posted by Ashviniurs View Post
    There is a very thin line between the money and risk management and hence most of the times both of these goes hand in hand when we are trading in this highky risky forex market. For one to excel in the forex trading business it is very much neccesary that they implement right money and risk management in their each and every trade executed.
    It is true, and it is even hard for many traders to differentiate the tow. But in my own way, I believe that the risk management is attributed to the things of risk the trader is taking or trade, and the amount he is taking the risk for, and the money management is the way of managing the money itself per time the trader uses it.

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  8. #37
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    Quote Originally Posted by Ashviniurs View Post
    There is a very thin line between the money and risk management and hence most of the times both of these goes hand in hand when we are trading in this highky risky forex market. For one to excel in the forex trading business it is very much neccesary that they implement right money and risk management in their each and every trade executed.
    based on personal experience, I think money management will run if the trader has control of emotions, trading without emotion is best trading in processing our emotions, while the condition of loss when emotions come into play would tend to make us increasingly chaotic trading, whereas if we are able to trade without emotion then every decision we make is more directed to the correct logic.

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  9. #38
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    Quote Originally Posted by ngalapreceh View Post
    based on personal experience, I think money management will run if the trader has control of emotions, trading without emotion is best trading in processing our emotions, while the condition of loss when emotions come into play would tend to make us increasingly chaotic trading, whereas if we are able to trade without emotion then every decision we make is more directed to the correct logic.
    That will depend on each trader's experience again i think. There are some trader that will absolutely can make quite a lot of good decision anyway in this business. SInce they know how to make the most money in here, they will certainly have their own good rule to earn safer income as well. Most of them will reduce the risk by watching the news more like what i am doing now.

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  10. #39
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    Quote Originally Posted by cozard007 View Post
    It is true, and it is even hard for many traders to differentiate the tow. But in my own way, I believe that the risk management is attributed to the things of risk the trader is taking or trade, and the amount he is taking the risk for, and the money management is the way of managing the money itself per time the trader uses it.
    Risk management is managing the risk in our trading. Forex is not for the uneducated people, it involves many things that a uneducated person can not handle, the first step for new trader is to gain all the knowledge about forex and forex requires the trader to have a lot of knowledge about forex, so if there is no knowledge, the other management will also be not there, so they will fail in forex.

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  11. #40
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    Quote Originally Posted by Earnperfect View Post
    Risk management is the part of risk management? What do you mean by this sir? I think you are talking about risk management and money management, and yes both of them are very important to use in trading. Money management is the selection of our lot size for each trade, and risk management is the selection of risk for each trade.
    [lang=id]yes, sometimes, the traders still get confusing about money management and risk management, and the first thing need to thought by the traders is how much the risk will be taken per trades, and after all, the traders can set money management for it to get enough margin to sustain the order,[/lang]

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