Money Management Vs. Risk Management
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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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    Nice thread yes I think our money management and risk management both are very important in trading. Following a good risk and reward ratio also very essential. I think we should choose good risk and reward ratio opportunities only. Personally I not like to do trade with 1:1 risk and reward ratio. We should choose more better opportunity like 1:3, 1:4 risk and reward

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  3. #3
    Trader amjad23510's Avatar
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    Quote Originally Posted by forexlearner View Post
    Nice thread yes I think our money management and risk management both are very important in trading. Following a good risk and reward ratio also very essential. I think we should choose good risk and reward ratio opportunities only. Personally I not like to do trade with 1:1 risk and reward ratio. We should choose more better opportunity like 1:3, 1:4 risk and reward
    I agree with you.money management is very important and along with tight money management ,we should have good risk reward ratio because it can give us consistent profit.Here in forex trading,only strategies or knowledge is not enough.we should have a lot of tricks and information in order to make good income.

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  4. #4
    Trader techboy's Avatar
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    I agree risk management is part of money management and it is a must in every trading strategy, there are lots of uncertainties in the market and if we will not follow good money management practice we will never become a good trader, it is one of the pillar in becoming a successful trader, some newbies ignore this part and so they suffer huge loses along the way.

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

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    Money management has nothing to do with leverage. Some may thing high leverage is bad. But people won't trade as much as with the leverage. Then, don't forget that some can't have a high deposit and leverage is the only solution to gain good profits. I think beginners must encourage themselves to aim for the next level and to not take a big risk from their first trading.

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    Quote Originally Posted by techboy View Post
    I agree risk management is part of money management and it is a must in every trading strategy, there are lots of uncertainties in the market and if we will not follow good money management practice we will never become a good trader, it is one of the pillar in becoming a successful trader, some newbies ignore this part and so they suffer huge loses along the way.
    If I am not mistkaken, the both will always work together. But in the actual sense, the meaning of the risk management is in trading directly, the risk the trader is taking per trade. For example, if I have $500 in my account, and I want to risk $50 per trade, then I know my risk, and I can manage it with the amount I am aiming to risk it for. And money management is in the number of risk you can take before the money is exhausted.

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    Quote Originally Posted by cozard007 View Post
    If I am not mistkaken, the both will always work together. But in the actual sense, the meaning of the risk management is in trading directly, the risk the trader is taking per trade. For example, if I have $500 in my account, and I want to risk $50 per trade, then I know my risk, and I can manage it with the amount I am aiming to risk it for. And money management is in the number of risk you can take before the money is exhausted.

    We should practice risk management in demo account first. So practice is must in every work. Trader can be self confident through everyday practice. Trader can be more strength through correcting and improving his trading. Trader can reach in his/her target through proper trading habits.

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    Trader lawners1791's Avatar
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    the risks management those to involved of the sum of money to work with the chance on entering trade as to run with the choice of series on initial preset as trader to occupy of the distinct on customs to work by the market profiles with the customs on distinctives.

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    it is good understanding, risk management come before money management, and it means, the traders should calculate the risk first before think about the profit, so they can set them with relevant and one thing need to noted that risk management will become their savior to protect balance, and we can see a difference between both of them
    this is a good thread

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  10. #10
    Trader amjad23510's Avatar
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    Quote Originally Posted by newentry View Post
    it is good understanding, risk management come before money management, and it means, the traders should calculate the risk first before think about the profit, so they can set them with relevant and one thing need to noted that risk management will become their savior to protect balance, and we can see a difference between both of them
    this is a good thread
    risk management is must for a trade.We should exercise venture management in demonstrate acrisk management get before money direction, and it agency, the traders should prognosticate the risk premiere before opine virtually the profit, so they can set them with pertinent and one abstraction condition to noted that essay management module beautify their saviour to protect equilibrize, and we can see a difference between both of them
    this is a complete rib

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    Last edited by amjad23510; 04-20-2015 at 07:37 AM.

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