Money management and risk assessment

by Sam Burgoon on January 10, 2018

To be successful at the Forex market one needs not only to make profitable deals but also to be able to keep the financial resources that once were earned. Even when the trader finds a successful strategy that brings profit to him, he can quickly lose all his profit because of poor money management.

The key component of money management is an adequate risk assessment. Prior to making a deal, the trader should figure out, what consequences can this deal bring. Therefore, he can decide for himself, what part of his deposit can he afford to lose at the certain deal.

Risk assessment is a base for calculating the size of the lot. If the lot is too small, the trader is too cautious and loses some profit. If the lot is too big, there is a risk of losing the bigger part of the deposit. To assess possible losses and find out the right size of a lot taking into account different options, it is convenient to use an online-calculator for traders (see )