Monday, August 4, 2008

Forex Money Management - a Simple Strategy For Bigger Gains and

Author: kelly Price

Forex money management is crucial to your trading success and
you need to at all time protect your core equity. This is a
simple effective strategy I have used for many years to improve
profitability and it works.

If you want to make money in forex, you have a choice of long
term trend following and trading the big trends, or trading the
over bought - oversold areas via swing trading.

Before we move on forget day trading or scalping it doesn't work
so you have the choice of the above trading methods and this
strategy combines them.

I am going to start with an example of my own trading. I am
dollar bullish on the euro and got my short in at 1.60 and we
have seen a big decline of 500 odd pips. A nice return and I
think the euro is going far lower - but we could get a good
rally as we are oversold at present. So what am I going to do?

Put 50% of the trade in the bank and leave 50% in the market.

Ok it could run lower but I am still in the market with 50% and
will put another 50% in on the next euro rally when it becomes
over bought.

The advantage of this simple money management tool is:

You are following the long term trend and banking along the way
using swing trading indicators, taking profits on surges and
putting dollar longs back in when the euro becomes overbought.

You are active but still following the long term trend.

Sure 500 pips is nice - but I think the euro is going to trade
into the 1.40s, so I want to hold the trend but if things go
against me, this strategy allow me to come out with a profit.

This method allows you to take a bit more risk to the stop and
remember - most traders can pick direction of trends, what they
can't do is get their stop levels right and get stopped out to

Most traders cannot simply sit on a long term trend and this
method allows them to do so and you are always in the market. If
you look at any forex chart you will see trends that last for
many months and make tens of thousands of dollar and this method
will let you tap into them.

50% is the core position 50% is liquidated on surges in your
favour and then put back in for full exposure on short term
rallies against you.

In the next article I will show you the indicators to use and
how to decide when to take profit and when to enter new
positions, with this simple but powerful money management

About the author:


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