In trading, money in the account (capital) is seen as something to sustain a trader’s life. And money or capital management is an essential skill for you to maximize that limited resource. Have you learned how to manage money to survive in the market? Or just follow emotions, and then lead to prolonged losses in the trading process.
To help you survive the initial hard times and make a profit in Olymp Trade, today I will share some capital management tips with a review of the famous Safari trading strategy.
The best way to manage money – Survival comes first
The first goal in money management is to ensure that you can survive in a long run. You need to avoid the risks that get you out of trading. The second goal is to earn slowly. The third goal is to increase the profit. But survival always comes first.
Losing traders often put a big amount of money into one trade. They continue to trade with the same volume or greater than that. Most losers try to get out of the hole they’ve dug. Good money management will help you avoid that pit in the first place.
The deeper you sink, the harder it will be for you to get out. Therefore, it is necessary to definitely give up the initial small losses. Avoid the case that that loss grows bigger and swallows your account.
To get rich in trading, do it slowly
New traders often try to get rich quick. They can win in the short term. But in the long run they will return all the profits they’ve earned because of their bottomless greed.
A person who makes 25% annual profits can become the king of Wall Street. A trader who doubles their capital in a year is considered a star in this field. If you make 30% profit a year, I guarantee people will bring money to you to manage for them.
Yet some guys say earning a profit of $10 in a day on a total capital of $100, equivalent to 10%, is too small. They want it to multiply many times. The greed has already made their eyes blind.
Get rid of that mindset when entering the financial markets. Instead, you should aim for the stability of long-term profits. That is the secret to be a successful trader.
Manage money effectively by setting a risk level for each trade
Most traders are killed by one of two fatal errors, carelessness and emotions. When a trader overcomes carelessness and achieves a certain level of success, confidence grows and emotions begin to dominate his actions.
Confidence will make him more greedy. He starts to increase his risk in a trade, and the continuous losses will put him out of the fight.
A professional trader allows to lose a small percentage of their capital in one trade. The tests show that the maximum risk they accept to lose on a trade is 2% of the total money they have.
Most newcomers to the market shake their heads when they hear this. Because that ruined their dream of getting rich quick.
The 2% rule helps you avoid the huge losses that the market can inflict on your account. Even a streak of 5 or 6 losses in a row won’t knock you out of the market.
Review the Safari trading strategy
Currency pairs: EUR/USD, EUR/JPY
Classic money management – Enter each order with the amount of 200$.
Order 1: The price started to recover slightly. At the same time, the MACD crossed the 0 from below and the Williams indicator also crossed the -50 line from below. All the conditions of Safari strategy has been met. Opened an UP order with the expiration time of 3 minutes.
Order 2: Price reversed from bearish to bullish with many green candlesticks in a row. At the bottom of the screen, a bullish entry signal appears when the MACD crossed the 0 from below and the Williams indicator did the same thing with the -50.
Order 3: The price was forming a clear downtrend. Meanwhile, the MACD crossed the 0 from above and the Williams indicator cut the -50 from above. It was safe to open a DOWN order with the 3-minute expiration time.
Order 4: Opened a safe UP order as soon as the MACD cut the 0 from below and the Williams indicator crossed the -50 line from below too.
The final result was 4 wins in a row. It was very wonderful. I shut down the laptop and finish my trading day.
If good money management helps you to survive in the tough financial market, then Safari trading strategy will be the tool to make profits. When these two are combined, you will have a weapon to earn a living by trading like professional traders.
Set up good risk management principles right now. Then choose a strategy that suits your personality. Practice and master it on the demo account before using it on the real one. If you can do that, success will come to you in the near future obviously.
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