Money; This is one of the most important trading lessons you will read in our Forex course.
Why is it so important? Well, we are in the business of making money by buying and selling currency pairs and because of that, we must learn how to manage our money properly.
Ironically, this is one of the most studied areas in foreign exchange trading. Many traders are eager to learn well about Forex trading regardless of the total size of their accounts.
They simply determine how much they can lose in a single trade and open it all at once! There is a term for this type of investment and it is called Betting.
If you learn how to control your losses, you have a good chance of making a profit.
When you trade without rules about money management, you’re betting. You’re not seeing a long-term return on your investment. Instead, you’re just looking for instant profit. The rules of money management not only protect us, they will also make us have very profitable investments in the future. If you don’t believe this and think gambling is the right way to go, pay attention to this example:
People go to Las Vegas all the time to gamble their money in the hope of making quick and easy money; many of these people do. So how is it possible for casinos to make so much money if the people who go to them make money?
The answer is that despite the people who make money, casinos are still profitable because they make a lot of money from people who don’t make money. This is where the term “banking always wins” comes from.
The truth is that casinos are very good statesmen. They know that in the long run, they will be the ones who make the money, not the players. The odds are in their favor. Even if someone wins $100,000 on a slot machine, casinos know that there will be about 100 more people who won’t win and so their money will go straight into casino pockets.
This is a classic example of how statesmen make more money than gamblers. Even though they both lose money, the casino in this case knows how to control their losses.
Essentially, this is how money management works. If you learn how to control your losses, you’ll have a good chance of making big profits.
You want to be the millionaire statistic, you want to be the banker, not the gambler, because in the long run you will always want to be the winner.