Educational Post: HOW IMPORTANT MONEY MANAGEMENT
-What is Money Management in Trading?
what is money management in trading
In general, the meaning of money management is a method and strategy of using and saving the money you have. This concept is applied in everyday life by calculating how much money you can spend and have to save from the monthly salary you receive.
Meanwhile, money management trading is a strategy carried out with the aim of increasing or decreasing position size in order to limit risk while achieving the greatest possible growth rate of a trading account.
Money management is one of the most important strategies for traders. As a trader, you can't catch too aggressive or aggressive. The more you lose, the potential loss will also be even greater. Conversely, the more you overcome decomposition, the more difficult it will be for you to achieve the financial goals you have set.
Traders, especially independent traders, generally implement money management trading with the aim of getting as much profit as possible while minimizing the level of risk.
-he first principle that must be followed in implementing money management trading is sticking to a trading plan. A trading plan is important and must be owned by every trader, especially in the highly volatile crypto market.
A trading plan can help you manage your risk and improve trading consistency thereby allowing you to earn higher amounts of profit. This trading plan covers entry and exit positions, indicators used, position sizes, and placing stop losses.
Also read: How to Make a Trading Plan to Optimize Your Profits!
Stop Loss Orders
Money management trading adheres to the management of risk factors by minimizing the potential losses that may arise. This can be done easily by using a stop loss order, which is an order that allows a trader to limit the amount of possible losses on an investment asset by setting a price limit for the asset at a certain point.
Avoid Over Trade
Over-trade is a condition that occurs when you have too many open positions, risk a disproportionate amount of capital on a single trading activity or expose your entire investment portfolio to undue risk. Usually, this condition is experienced by novice traders due to failure to control emotions or being influenced by FUD and FOMO.
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