Why do most novice traders lose their deposits quickly? It’s simple, because they don’t know how to manage their money. Control of your money or in other words, money management is the proper distribution of funds in order to reduce the risk of losing the entire deposit amount on unprofitable trades.
Let’s break it down into the 3 most popular money management techniques!
1. Martingale Method
The idea of Martingale is simple as follows, Set the minimum amount for your trade, with which you will start trading – Double the amount of the trade during each losing trade until you close it with profit – Return to the specified minimum amount after making a successful trade.
2. Parlay Style (Opposite of Martingale)
The idea of this style is similar to that of the martingale style. The main difference is that the trade amount is doubled if only a profitable trade was made previously. But you need to remember that the more you double the trade amount, the higher the risk of losing all your profits. Therefore, before you start using the opposite method of Martingale, it is important to clearly define the number of trades in which you will double the amount. We highly recommend not doubling the trading amount more than four times in a row!
3. Fixed Amount Method
The fixed amount method is simple and great for beginners. The idea of the method is to set a fixed amount that you will be risking when trading. The amount of your trades will not change during the entire trading session. It is very important to correctly determine the amount of risk in relation to your deposit. We recommend setting your maximum trade amount to no more than 1-5% of your deposit. Now you know the basics of money management, so you won’t lose, but rather increase your capital!