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Money Management: One of the Keys to Success


Online trading of currencies (Forex), cryptocurrencies, and CFD deals with other financial assets (stocks, gold, oil, etc.) offer unique opportunities for investors and traders. However, to achieve long-term profitability and minimize risks, proper capital management is essential. This is where the concept of handling capitals, or 'money management' becomes significant.

What is Capital Handling?

Capital controlling, also known as money management, is a strategy that determines how an investor or trader distributes their capital among various financial assets and transactions, as well as how they control risks and manage position sizes. Financial markets can be volatile and unpredictable. The primary goal of money management is to preserve as much of the trader's or investor's funds as possible during periods of loss, while also effectively capitalizing on profitable trading opportunities. The main components of money management include:

Money Management Examples

It's important to note that Forex and CFD markets are subject to risk, and no strategy can provide full protection against unfavourable situations. Therefore, if you frequently see your stop-loss orders being triggered, you might be better off stopping your trading, taking a break, and carefully analysing the reasons for the losses. It's crucial to note that gambling can be very harmful, and a trader must learn to manage their emotions to correctly assess the situation.

It's possible that your trading style and strategy do not suit the current market volatility, and you need to wait until the situation becomes calmer. Perhaps, you should apply your strategy to transactions with other financial instruments, or even change it to another one.

What do Financial Market Gurus Advise?

Here are some pieces of advice from renowned investors and traders regarding capital handling (money management):

Warren Buffett:

Paul Tudor Jones:

George Soros:

Ray Dalio:

Linda Raschke:

These pieces of advice from renowned investors and traders underline the importance of capital management, its preservation (even at the expense of profit), and risk control. Don't forget that capital management is a process that requires constant monitoring, analysis, and adaptation. For this, each trader and investor should develop their own strategy, considering their financial capabilities and goals. It is also necessary to remember the importance of learning, developing financial skills, and constant improvement in the field of trading.

Only a combination of all these factors will pave the way for you from random successes and failures to professionalism and stable profit.

#source


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