Money Management Vs. Risk Management
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    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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    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 Ruhul Amin'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
    Without money management trade like drive a car without a break. And without risk management is same as we drive with drunk mood. So if a trader want to be success on forex, he should follow both of them. I do not think choose 1:3 or grater is a good idea. It is very risky and most of the time, It is not possible to take profit in 1:3 or 1:4 ratio.

    - - - Updated - - -

    Quote Originally Posted by amjad23510 View Post
    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.
    In order to make money in forex, it is definitely needed to be a good money management. But without proper skill and knowledge of trading, money management will not work. A trader need at least 60% success rate of trading to make money management apply successfully.

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  5. #5
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    Quote Originally Posted by Ruhul Amin View Post
    Without money management trade like drive a car without a break.
    yes, this is a good explanation, risk management and money management become the defense for traders or limit their losing, so the traders will get more chances for better trading , and also with them, they can keep good trading on the right track and get the best performance for the trading system

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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
    Choosing right money management and risk management can give the better results and we should follow the proper money management and risk management and should only take the risk which we afford to lose, we should not take the unnecessary risk in order to get the fruitful result.

    We should concentrate on our knowledge and experience and should always perform our work with positive attitude, I always make the decision after following the proper money management and risk management and I am earning reasonable mount.

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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
    Money management is one method for control on your trading loss because if you will use this method so then you can control on your loss and methods can give you more benefits. and you can use the stop loss feature with your trades if you will working on the stop loss so then you can be safe in the market and you can loss all your money..

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    Quote Originally Posted by ptcdirectory View Post
    Money management is one method for control on your trading loss because if you will use this method so then you can control on your loss and methods can give you more benefits. and you can use the stop loss feature with your trades if you will working on the stop loss so then you can be safe in the market and you can loss all your money..
    It is what all trader have to know in use, so that they will not be losing money without control. The trading of forex is not what is that hard for traders, they will need to make sure that they are planning things well. And one of the good means to plan on how to trade for success is to work with the money and risk management, this makes account stable.

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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 seen many traders who are not good in trade but they are take care of this situation cause they know very well if they not think about money management then they wash their account so when u make your strategy then you must take care of this thing in every trade your risk % is 10 only if you increase this then may be you are not sure about it..

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    Zahida, yes i am one of them i simply accept my mistakes, actually i also take big risks from small capital, but anyone tell me what can i do? from small capital we can not earn good without using big risk, if we use small risk after one year also we can not make it big still without any withdrawl, so i am totally confused so i start to take big risks

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