Money management is critical in FOREX trading to maximize profits and limit losses and here is a common problem has it ever happened to you?

You enter a trade the market comes back takes you out at your stop on a reaction and then you watch in frustration as the trade piles up $10,000 or more!

It happens to us all – Here are some simple ways to stay with a trade and use money management to milk the trade for all its worth.

1. Take a risk

Many people who engage in currency trading think they can do it by taking very low risks and you often here risk 5% on a trade. Well if you have an account of $10,000 that’s just $500.00 risk.

If you want to make money then you need to understand volatility!

Placing stops with to little risk is the major reason people lose (you don’t need to be rash and take to much risk) but understand big profits means taking calculated risks.

Foreign exchange markets offer big profits so you need to take calculated risks.

2. Diversification

You here it all the time spread your risk. Another word for this is reduce your profit potential!

3. Risk more per trade

If you want to make big profits don’t diversify too much on a small account.

Have the confidence to go for the trades with the really big profit potential and risk more ( this is especially true on small accounts ) look for the big trending moves and go for them and make sure that your stop is not to close give the market room to breathe.

This is NOT be reckless its being sensible to make a big profit you need to take a calculated risk

4. Don’t move the stop to soon!

Many traders as soon as they have a profit move the stop to lock in profit. Don’t be tempted to do this.

Your main aim at the start of a major trend is to get the stop to breakeven.

The more a trend accelerates the more the chance it will have strong pullback.

Wait you’re in it to make the big profits and that means following the big trends longer term.

People become so obsessed with locking in a small profit they end up guaranteeing that they will be stopped out.

5. Have the courage to accept big gains!

We all want big gains but most traders can’t accept them the bigger a profit becomes the more they want to protect it or not lose. Stops go to close and then there out.

If a long term major move is on the way don’t make this mistake it will cost you thousands or tens of thousands of potential profit.

6. Take calculated risks

FOREX Trading is all about taking a risk at the right time and having the courage of your conviction – to sit and watch a trend develop longer term and take short term spikes against you that eat into your open equity.

It’s hard, but if you want the big profit in online trading that’s what you need to do.

Fact is many traders (even professional traders on Wall Street) try to restrict risk so much they can never win and milk the big trades for all there worth.

In the next part of this article we are going to show you how to use options correctly to help making short term spikes against you in an open trade easier to take.

Look at a long term chart and you will see currency trends can last for months or years if you can lock into them the profits are huge and that should be aim of all traders.

Take calculated risks, at the right time, have courage to hold your trade long term and watch the profits accumulate.

Eric