Being a Forex trader with a longer time frame means managing risk with good strategies. Most of the beginners get capital and think of trading. They use so much money on Forex without any commitment to themselves. As an investor keeping the conservative approach can be helpful to get the best. If beginners trade with a higher percentage of their capital, then they can see that it will be wiped out soon.
Why trading portfolio matters?
We can think ETF trading as a game where every trader has been given the same trades. At first, it may seem pointless where everyone is given the same trades. If you think if everyone’s investment is the same, everyone is going to get the win. If you are thinking like that, a great surprise is waiting for you. In reality, everyone will get different result even if they start with the same set of financial instruments. This happens because people make different decisions based on their different thinking. The trading portfolio becomes different for different individuals.
This is considered one of the valuable keys to Forex as investors must know how much they should buy in each financial instrument. Beginners should let their profit run, which is considered as one of the core principles to minimize the risk in the short or long term. If a beginner can understand his risk multiple, he can minimize it and let his profit run. Its multiples indicate the solid strategy in trading based on the trade size and being stick to it. A great measurement of thumb we get here is not taking the risk of more than 1% in an ETF account. Those who new to this profession can try Saxo markets as they provide a high-end trading environment to the retail traders. Trade management becomes easier when the retail traders start relying on a smart broker.
Newbies can also use the “80/20 principle” during the investment of the money, which indicates that from 20% trade, 80% of the income can be generated. For example, we have made ten trades and of the winnings among them are making some money for us, and a few of the losers are losing some money from us. Now the good thing is our marginal losers can be by-passed by our winning trades. To our astonishment, we will discover that the majority of the return of our investment is coming from only 2-3 trades.
These few trades really add value to the ETF account and increase the net worth gradually. We should try to perform going beyond our expectation. The final priority must be our expectation which can increase the value of our trading business.
Number of trades to take
Beginners should not buy more than 2-3 financial instruments based on the market trend. For example, a day trader will place an order and stay in the platform for 20-60 minutes. He will take the profit, and after two more trades in such a way, he should close his trading for that day.
In the second situation, we may stay with our trades until it gets stopped. This type of investor buys a financial instrument and closes his laptop for that day. The next day he comes to see the result regarding the progress and finds the possible result. After checking, he adds few more and waits for a certain period to sell in the resistance.
An investor must calculate the size of his lot and estimate the risk to reward ratio, which will be 1:3. That means we can take only $1 of risk if our profit is $3. Without proper tracking of the performance, it is really tough to conduct trading.
To the bottom line, money management in trading is really very crucial if newbies do not want to lose their accounts wiped out. New investors lose 80% of the investment without having a proper management system, and for this reason, experts encourage newbies to build the best risk management system available.