Money Management

You’ve probably heard about people who’ve invested no more than $1000 into Forex trading and made millions out of it, just like you must have surely heard of many who started off with a huge investment but ended up losing majority of it. How can things go in such differing directions? This simply proves that the way you manage the money you invest is much more important than the amount of money you invest. In Forex trading, this is what’s referred to as money management.
Money management is an art that makes the difference between simply earning money, and the ability to preserve the earned money and make it multiply.

Trading is exciting and its aim is to make a decent amount of extra profit. Money management consists of three steps:

Gain New Money

In forex trading, money can be gained by executing profitable trades. The key is to learn how to make profits in any trend, volatility or price movement.
That’s not to say that you must trade in every situation, but rather that you won’t let any situation push you out of the market due to lack of experience, and your revenue shouldn’t have to dry up. The idea is to keep new money coming in, even when it’s not big amounts of money.

Preserve Gained Money

Gaining money is only half the battle, preserving it is the other half. Don’t bite more than you can chew. 
Financially speaking, spend but don’t exhaust all your money and always make sure you have savings. In all the success, don’t forget to stick to your winning plan so you can continue making profits.

Utilize Gained Money

Now that you have the money and you’ve managed to not spend it, it’s time to put it to good use, in order to make more money. The best way to do that is by allocating a percentage of your profits and savings for reinvestment.

This way you are utilizing the profits to potentially make more profits. Static money will eventually be used and ultimately lost. By utilizing your profits to increase your capital, you give yourself more freedom to trade.