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    Registered user ara's Avatar
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    Financial Management of Forex Trader

    Hello all, Now I want to talk a little about financial management of forex trader. This is my personal idea, so you have to respect me even if you agree or disagree. At least this can be a small motivation to change your mindset as a trader.

    PROEM
    How long have you become a trader? Are you a financially monotonous person? Are you still have problems in making profit in forex trading (still unprofitable) or you have become a profitable trader but you are still difficult to develop into a professional trader or a big business in forex business?
    Whatever your answer, I hope you stay relaxed.

    If you are still unprofitable, you should stay relaxed, you have the opportunity to become an expert trader, I hope this article can be a motivation for you.
    If you are able to become profitable, and have income in forex business, but not much, you only have low investment in forex, your Income from forex trading is only enough to fulfill your daily needs for a month or two months, you should stay relaxed, you have the opportunity to become a big trader . I hope this article can give you a little idea.
    If you are a profitable trader, you have a big income from forex trading, but you are difficult to develop business again and again? Or you are confused in allocating your money next? Please calm down, I hope we can discuss here.
    If you are a profitable trader, you have a big income from forex trading, but you always spend all your income, so you hard to grow your business? This is a serious problem for you, you can't relax in this case. I hope you can change after reading this article, you have to make big changes financially. Especially if you spend your income just for unimportant things, for example: spending your money by going to a night club, spending your money just for beauty salon, for branded fashion, and for anything that is not important for your life.

    ABOUT FOREX TRADING
    I will not talk much in this case, I will just take the idea of many traders, they say that there are 3 important things in forex trading:
    1. Psychology. They say that psychology is the biggest factor affecting a forex trader, let's say 80% or more.
    2. Trading Strategy. There are many trading strategies in forex trading, you can find millions of trading strategies that are shared for free on the internet, trading strategy allows us to analyze the market and take decisions for entry and exit. To be honest I'm not very good in terms of market analysis. But you can find many members here who are good in analyzing the market, I even find member who are expert in market analysis, I don't mention his name, but I really appreciate him.
    3. Money Management. I read an article in this forum about money management, here. Yes, that's a great article, but I will not talk about it, because I think it's very limited. I will talk about money management more broadly. That is financial management of forex trader. I take the word "financial management" rather than "money management", actually I'm not comfortable to say money management, although I often say money management in many posts, but to be honest I am more comfortable when I talking about financial management. I don't really understand the similarities and differences of money management and financial management. Because both have the same meaning if I translate it into the local language (my national language). But I have a slightly different view on this, if I say money management, then I feel I don't involve assets. But if I say financial management, then I feel I'm talking assets as well. Although both are the same meaning when I use them in my national language.

    Conclusion: Do you know the structure inside a company? A company must have a corporate organizational structure. For example: Primary Director, planning director, general manager, finance manager, personnel manager, operations manager, IT manager, accounting, admin, division board etc. Well..., Forex trading is an independent business, you are only responsible to yourself (except manager), you have no responsibility to others. Like you have a company but you manage it yourself, without any organizational structure and without the help of others or employees. You are the owner, you are the financier, you are the director, you are the manager, you are the accountant, you are the admin. That's why forex trading looks like simple but complex.

    FINANCIAL MANAGEMENT
    Definition
    As I have explained above, money management and financial management have the same meaning when I translated both to my national language.
    But I will take a definition from a source about Money Management and Financial management, so you can formulate both of them.

    Money Management (taken from investopedia) : Money management is the process of budgeting, saving, investing, spending or otherwise overseeing the capital usage of an individual or group. The predominant use of the phrase in financial markets is that of an investment professional making investment decisions for large pools of funds, such as mutual funds or pension plans. Money management can also be referred to as "investment management" and "portfolio management."

    Financial Management (James Van Horne) : "All activities directly related to the acquisition of funds and the management of assets (assets) with the overall purpose."

    A professional trader must know how to manage all the elements and terms of finance, this must be done because finance is one important function in achieving your goals. The element of financial management must be known by a trader. Let's say a trader does not know anything that becomes elements of financial management, it will appear difficulty in running the forex business. Therefore, a trader must be able to know all the activities of financial management, especially analyzing the source of funds and its use to realize the maximum profit. A trader must understand the flow of money both external and internal.

    From the description of the above background, I can take a few things:

    Financial management of forex trader is an activity of planning, budgeting, inspection, management, control, search and deposit funds by traders.

    The financial management of forex trader deals with 3 activities :
    1. Activity in the use of funds, the activity to invest funds in various instruments. Here we use it in our trading account, here we know about risk reward ratio and winning rates (you can read my thread here). But I will talk more broadly. I divide into six types:
    *Liquidity Ratio, this ratio to measure the level of liquidity of any existing instruments, so we know which trading instruments are the most liquid and provide the optimal income related to the timing of acquisition.
    *Leverage Ratio, this ratio is used to determine which leverage is more optimal for you in managing your trading account. Each broker provides different levels of leverage, you should be wise in choosing according to the level of comfortable with your trading strategy and psychology and of course safety for your capital.
    *Activity Ratio, this ratio is used to measure management effectiveness in using trading strategy. All activity ratios involve a comparison between the trading levels of your trading strategy. Here we look for a good trading strategy with a comparison of the quantity and quality of our trading strategy.
    *Profitability Ratio, this ratio is used to measure the effectiveness of management seen from the profit generated and loss. We may often talking about Winning Rate or Win Loss Ratio.
    *Growth Ratio, this ratio is used to measure how well a trader maintains a position of equity growth. You can see from the performance of your trade history graphs, all the time, monthly or weekly. Good graphics continue to increase like a climb.
    *Risk Reward Ratio, the ratio reflects the combination of the effects of risk and rewards.
    2. Activity of fund acquisition, that is activity to get fund source, both from internal fund source (profit or income from trading activities, rebates, affiliates, prize of demo competition, deposit bonus, etc) and external fund source (personal savings, bank loans, investors, stolen funds, etc).
    3. Asset management activities, once profits are obtained and allocated in asset form, assets should be managed as efficiently as possible. Suppose you have monthly income from forex trading, but still in small quantities, because your investment in forex is small. What should you do? Of course the first thing you should do is grow your investment. For example, you are using compounding system, or you open several new trading accounts, or you expand your investment into stocks, commodities, crypto currencies, PAMM, Forexcopy, or you can expand into other types of investments, or expand to other types of businesses. Remember: Your computer and smartphone are an asset too, so you should take it from the smallest asset to the biggest asset.

    There are few principles of financial management :
    *Consistency, The application of your financial management must be consistent, not changing from time to time. But keep in mind that the system of financial management that has been taken does not mean no adjustments should be made, in case of significant changes in financial conditions. Such changes should be accompanied by a clear and acceptable reason. Inconsistent financial management may indicate that there is manipulation within you or there is a problem with your psychological condition.
    *Accountability, You should be able to explain the use of funds and what things have been accomplished. This principle is required as a form of accountability to yourself.
    *Transparency, Have a complete, reasonable, timely and accurate financial report. If you use the capital of the investor for forex trading, then your financial statements are not only for your own, but also must be accessible by your investors. This deviation from the principle of transparency may indicate that you have hidden something, and it can seriously damage your business finances. Giving investor password is the simplest way of doing this.
    *Viability, All operational expenses and those at the strategic level must be adjusted to the existing funds, this should be done so that the financial health of your business can be maintained. You certainly want the continuity of business does not stop, operate continuously in a sustainable manner. Financial management is required to develop a financial plan that can indicate how far you can execute a strategic plan in meeting the necessary financial needs.
    *Integrity, You must have a qualified level of integrity in carrying out your business operations. In addition, records and financial statements must be maintained with integrity by providing complete financial information and a high degree of accuracy in financial records.
    *Stewardship, Financial management must be able to effectively manage the funds already earned and ensure the funds obtained will be used as possible. Financial management should do so with care when strategically setting out, identifying financial risks and setting up and creating a financial control system that best suits your character.

    Financial Management Objectives
    The main purpose of financial management for traders is to maximize and grow investments, or expand into other types of investments, or expand into other businesses in other areas, so that you ultimately have financial freedom or become a professional trader or a big businessman. So, financial management aims to MAXIMIZE your finances, business, and assets. Management should be able to suppress unnecessary money circulation. Activities that could harm your business. Don't waste your time, you better have a far-sighted view, your future is more meaningful. If you can't afford to make 50% -100% profit per month, why should you force it? 10% profit per month will be more effective for you and also guarantee your future better.

    But one of the most important things in this article is: If you want to be a big businessman, or at least you hope to become a great trader or a trader who has big capital, then you should have a clear concept about your financial management plan, and apply it appropriately and be patient. Your patience today is a rose in the future, at least that is done by a great man like Warren Buffett.

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    Last edited by ara; 06-24-2018 at 09:27 AM. Reason: edit words

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    Registered user ara's Avatar
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    Quote Originally Posted by Azis Muslim View Post
    This honestly good but since there were too much writings, I can only take some good points from your thread. Psychology does play biggest role in this business which could affect our performance both in long and short period of time. Even with the best strategies, we still can not make any good trades if our psychology management is terrible. I once heard my tutor told me that emotions are destructible and those who failed to control themselves with emotions, they will fail early.
    haha, yeah writing is my hobby since I was in high school, so don't be surprised if i have too much writings in my threads. Talking about psychology in forex trading, of course it is an important part that we can't ignore. Easy to talk about but difficult to overcome. That is the fact of psychological problems in forex trading.

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    Quote Originally Posted by ara View Post
    haha, yeah writing is my hobby since I was in high school, so don't be surprised if i have too much writings in my threads. Talking about psychology in forex trading, of course it is an important part that we can't ignore. Easy to talk about but difficult to overcome. That is the fact of psychological problems in forex trading.
    You are right regarding all what you have wrote on your threads. Managing our funds in forex trading has a lot of do with discipline, if we are not disciplined then we can't implement the risk management as supposed. Also setting the plans right is one of the most important thing, because when there is a plan on how we are to trade and then it is been followed then we can make good decisions.

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    Registered user debian's Avatar
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    Quote Originally Posted by Makaveli View Post
    You are right regarding all what you have wrote on your threads. Managing our funds in forex trading has a lot of do with discipline, if we are not disciplined then we can't implement the risk management as supposed. Also setting the plans right is one of the most important thing, because when there is a plan on how we are to trade and then it is been followed then we can make good decisions.
    That is right , I am sure every trader knows what risk management is and how importance role in the forex trading business but sometimes the traders prefer to get profit in an irrational way rather than risk loss control so that ambition that will slowly make failure when run forex business.

    Therefore, Implementing of financial management such as use the lot size reasonably is very needed and it is a form of trader concern about the trader responsibility of investment in forex business and also its will make an effect for more relax in trading instead of fear or anxiety where the investment is at bet will disappear in an instant

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    To prove on the means of learning good, we should sure be ready to understand the right point of practice. Management in forex is one important way of trading this market that will protect our capital and this should be a good point for all of us in this business. With great management we will understand the real point of trading good and we can have all the chance to minimize risk and see we have the right plans to earn well from forex trading.

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    Quote Originally Posted by Senorita View Post
    To prove on the means of learning good, we should sure be ready to understand the right point of practice. Management in forex is one important way of trading this market that will protect our capital and this should be a good point for all of us in this business. With great management we will understand the real point of trading good and we can have all the chance to minimize risk and see we have the right plans to earn well from forex trading.
    I think money management is more of being disciplined and not just practicing it, in such a way that the determination of being disciplined to always ensure maximum protection over our account should be developed and then we should always decide on making good quality decisions which isn't coming from being emotional.

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    Rookie Sascha's Avatar
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    my only issue in this forex trading is with my limited budget because i can't get enough deposit just as i wish for. each profits made were gone from account because i always withdraw them for my daily need. never had a chance to get extra money from trading because my method is relatively safe and my earning is also not big. thank goodness i don't have any issue in trading and can do something better with my strategy.

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    Registered user ara's Avatar
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    Quote Originally Posted by Sascha View Post
    my only issue in this forex trading is with my limited budget because i can't get enough deposit just as i wish for. each profits made were gone from account because i always withdraw them for my daily need. never had a chance to get extra money from trading because my method is relatively safe and my earning is also not big. thank goodness i don't have any issue in trading and can do something better with my strategy.
    Sascha..., I love reading your comments, I really appreciate you as a fighter in forex business, you are trade for a living. I hope that one day you can have a more budget for deposits in forex so you can grow it into a fantastic amount for your future. Indeed, you don't have any issues in this matter, but I pray for your progress.
    Quote Originally Posted by Darkhorse View Post
    account should be developed
    This is the essence of investment, our goal is for financial welfare in the long run.

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    Rookie Yayami's Avatar
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    managing the money during trading with forex market could be difficult to do especially for traders who are using their last money to trade. i also wish for our friends in this forum who are struggling with their trading and trade so hard to achieve their success because i'm still far to get that goal since i'm still in "learning" progress and still so bad at managing my money in trading. as usual, your threads always exciting and informative to read.

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    Quote Originally Posted by Yayami View Post
    managing the money during trading with forex market could be difficult to do especially for traders who are using their last money to trade. i also wish for our friends in this forum who are struggling with their trading and trade so hard to achieve their success because i'm still far to get that goal since i'm still in "learning" progress and still so bad at managing my money in trading. as usual, your threads always exciting and informative to read.
    That would only be difficult when the trader hasn't been able to learn the act and approach of being disciplined. It is important to know what disciplined could help us get in the market. Because the more disciplined a trader is the more the trader would know that his or her money is so much important and then should be correctly managed.

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    Rookie Killer_Queen's Avatar
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    Quote Originally Posted by Brain View Post
    That would only be difficult when the trader hasn't been able to learn the act and approach of being disciplined. It is important to know what disciplined could help us get in the market. Because the more disciplined a trader is the more the trader would know that his or her money is so much important and then should be correctly managed.
    managing our financial is the first thing we must do before we decide to use our money as our initial deposit into our trading account. the money of our deposit must be safe and we must manage the rest like our strategy and emotions to control first. it is impossible to work with a stable fund to trade if we do not know how to manage the rest and become a forex trader has many preparations.

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