(Today FX24 would like to introduce readers an insightful share on the issue of capital management by expert Nguyen Chi Thanh, who has nearly ten years of experience in the forex market. Especially for newcomers, read and pay more attention to capital management skills, as it will be extremely important factor on your trading path.).

Entering the trading path, you will hear some people who say that to win, 60% is psychological, 30% is capital management and 10% is analysis (technical or basic). Analytical skills actually account for only a small proportion of the winning formula, the rest are risk management and trading psychology. So what is capital management? And how does it interact with the psychology of trading? In this article, we discuss in depth the field of capital management.

Why is capital management important?

Since we are investing to make money, and to make money, we must learn how to manage risk (control potential losses that may occur in the future).

Ironically, this is one of the most overlooked aspects of the transaction.

Many traders just eager to head into the market immediately, want to get rich quickly, after listening to the enticing of the stormy experts out there regardless of the total account size (or assets) of they. Some even play big, sell property or borrow money to pour money into investments. They simply determine how much they can lose in a transaction (or don't even care, “win” – they tell themselves) and press the BUY / SELL button. This type of transaction is nothing more than BOOKING! Then go to Las Vegas, Macau or Cambodia quickly!

After all, when you trade without any risk management principles, you're actually gambling.

You are not expecting a long-term return. Instead, you spend money and hope to win jackpots, such as Vietlot.

Be less daydreaming, always remember that risk management rules will not only protect you but can also help you earn more profits in the long run. You do not agree? Do you think gambling is also a way to get rich? Do you think people come to the casino in the hope of earning a big pot, and in fact, many have won big?

So how do casinos in the world still make a ton of money if many of their customers win so big? What owner of a casino in Macau lives with 4 wives and a billion-dollar fortune (Money doesn't worry about his wife :)).

The answer is that while some customers win, in the long run, casinos are still profitable because they make more money from the losers.

The proverb “The house always wins” is that.

The truth is that casino owners are very wealthy statisticians. They know that in the long run, they will be the ones who make money, not gamblers.

Even if you win a $ 100,000 jackpot from the slot machine, the casino owner knows that there will be hundreds of others who have lost money and the money will go right back into their pockets.

This is a classic example of how casino owners make money through gamblers. Although they may lose money, they always know how to control their losses.

Basically, this is how risk management works in practice. If you learn to control your losses, you will have a chance to make a profit.

Forex trading is a probability game, which means you have to pull as many elements as possible into your favor.

In casinos, the house edge is sometimes 5% higher than the player. But 5% is the difference between being a winner or a loser.

Want to win the market? Learn how to make a house! Do not gamble!

Rub your eyes and read on, the next part is important.

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How much capital do you need to get rich in this market?


Whatever you say, if you want to make money, you must have money first, money to produce money. This is the market. In fact, you can play demo with good money. But this number is rare, I'll write in detail in another article. Things are hard to ignore, making things easy first. Like most people, we need money to open an account and make a profit. In addition, to be “more orthodox”, we need to spend some costs to learn, as vocational training costs. Any job is the same, right?

Regarding the cost, when you first step on this road, many pitfalls will be available to wait for you. The “teachers”, “specialized – peeling – skin” like flock of flabby vultures out there will wait for you with greedy eyes. They will spread the most delicious pieces of butter on the piece of cake, put in the trap and cheer you, draw a beautiful perspective for you, make you dazed step into the trap. That's it. This is stupid. To be frankly like that!

Some people pay stupid fees and borrow money to rush into the market, just like gamblers thirsty. And death is foreseen, running from the sun!

But the problem is how much money do I need to make money from forex? Hmm, this is difficult. It depends on how much money you have in your wallet. Experts recommend that we only risk 10% of our capital. For example, if you have an idle capital of 1 billion, then you should only spend 100 million for forex trading. As for the writer of this article, the number of 100 million you need to divide 10 times. That is, you should only spend 10 million for opening an account for the first time. Well, I just learned about forex yesterday, today I will open an account of 10 million and make money. No no, I didn't say that. You need to go through a route. Sports field sweat, battle less bloody.

Trading with real money makes you feel better, learn faster. But that is not necessarily true in this market. You need to spend quite a bit of time to find yourself a method. During this “secret search” phase, the good news is that you don't have to spend a ton of money on the “teachers” to cut the wind out there – don't waste your money, use your search capabilities. Google does not charge. Lots of quality free courses online. If you know English is a great advantage, if not then Vietnamese now has a lot of books and documents. (Typically forex knowledge is immense right in this fx24.net website). Work hard to find. Even if you do not do this, you should not trade, do something else for the beginning. Every sector is the same, self-study is very important, you have to be proactive in your studies. You can be rich without a degree, but you cannot be rich without learning.

After finding the right method, trade with a demo account or a small amount of months. When you feel confident, you will gradually increase the trading capital.

Why do I say I need to divide 100 million into 10 times. Because, you will definitely lose at the beginning. In the first 1 year, the first 5 years, even 10 years, you will make a loss. 95% of traders lose money in the first year. A number that sounds like … giving up forex too. But on reflection, every industry will only have the top 5% or 10% to be successful. The same goes for Forex. For Forex, losses in the first year are actually better for you than winning. You are new to the market and winning continuously is a sign of … early death. Pride and overconfidence will kill you … dead!

Ok, got it all. But grab back, there are 10 million, how can you get rich? This is also a difficult question. I'm not saying you will make 100 million / month from this 10 million. In fact, to make a living in this market, you have to count your monthly profits.

For example, your average monthly profit is 2%. The cost of your life is 50 million per month. Then the number you need to open an account to make a living is 2.5 billion. Well, the numbers are not small. But this is a completely realistic number. There is never a way that you spend 50 million and make about 50 million per month (100% profit per month). Some day traders, they may earn a few hundred% or several thousand% per month, but in the long run, the profit rate will be much lower. Annual profits range from 20-100% is a reasonable number and can be achieved. Higher is probably only in mouse traps. 95% of traders lose because they want profits from tens of% / month.

If your capital is small and still want to make money on this market, trade a stable and safe profit. Just like that, the money will be on you. Trust me, your account does not need to be too big. Please maintain a profit account of 2-5% / month with the highest loss not exceeding 2-5%. Someone will come to you. If no one finds you, comment below this article, I will find you.

How should you manage your capital?

There are 2 ways, to say so.

The first is never to risk more than 2% / order on a large account

The second is to split the account.

The right way for a long-term trader (Position trader)

The second way is suitable for day traders.

What kind of trader are you?

Regardless of the school, you must follow the rules of capital management. In addition, it is necessary to limit the maximum losses per month for long-term traders and limit the maximum losses per day, week if you are a day trader.

When the maximum loss is reached, definitely leave the market and stabilize the sentiment. I know this is difficult, you will want to plunge into revenge after losing market. You can win a few times, but in the long run this is not good, and you will lose in the long run if you have revenge mentality. Do not let the losses are too heavy, it will be difficult for you to get up. To conclude this article, I give a calculation for you to easily imagine: the more losses you make, the more difficult it is to get your initial capital back:


You have just read the article: “Capital management is a vital element of traders

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Author: Nguyen Chi Thanh

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