Forex Money Management for Forex Sailing

You’ve learned the basic rules of trading with Forex Sailing, so how do you manage your trades with proper money management?
In a previous post, I discussed the basic forex money management principles to live by. The principles are extremely simple, but it can be tempting to “bend the rules” because you want to make more money fast!

Have Self Control & Become a Discplined Forex Trader

I hate the word discipline. It sounds like a bunch of hard work (and it is).  In order to be successful with online forex trading, we need proper forex money management.
So the next time you consider breaking these rules “just once,” or “one this higher-probability trade,” look in the mirror and rededicate yourself to following the habits of a forex winner.

Practical Forex Money Management

The core money management rule is:
NEVER risk more than 2-5% of your forex trading account on any ONE trade!
In case you weren’t paying attention, this means two things:

• NEVER, EVER, EVER risk more than 5% of your online forex trading account on a SINGLE trade!
• It’s a “good idea” to risk less than 5%, a safer plan is 2% (even though 5% is ok)

Measuring Your Forex Trading Risk on a Trade

So how do you know how much money you’re risking on a single trade?
It’s actually pretty easy.
On a normal forex trading account, 1 pip = $1 USD. This is a common value for most online forex brokers.
Since I’m trying to make online forex trading accessible to as many people as possible, I’ll be using an account where 1 pip = $0.10 USD.  Since a pip is only 10 cents, you’ll be able to do trades with 1/10th of the money you’d normally require.

Your Stop is Your Risk

The total amount of money you risk in a trade is how many pips below your entry price that you place your stop order.
In a recent forex sailing example, I shared a trade with a total risk of 131 pips.  When following the rules for forex sailing, the stop had to be placed 131 pips below the entry price.
Since 1 pip = $0.10 in this type of trading account, the total risk = 131 * $0.10 = $13.10.
Since $13.10 is at risk, we need to make sure that we’re not risking more than 5% to satisfy our forex money management plan.

Multiply By 20 for Proper Forex Money Management

If you multiply the total risk in a trade by twenty (20), you’ll be following the 5% rule.
To properly do a trade that requires a risk of $13.10, we need to have an online forex trading account balance of $13.10 * 20 = $262.
Before entering any trade, you’ll need to do this quick calculation. You can also do the calculation in reverse.

Calculating Maximum Risk Per Trade for You Forex Trading Account

Another way to determine if you can do a trade is to look at your online forex trading account balance.
If you have $500, you can risk up to 5% per trade, so you can risk $500 * 5% = $25 = 250 pips (@$0.10/pip).
If you have $750, you can risk up to 5% per trade, so you can risk $750 * 5% = $37.50 = 375 pips (@$0.10/pip).

The 10-cent-HALF Rule of Instant Forex Money Management

It turns out that you can do proper forex money management with a simple glance of your forex trading account balance.
If you’re using a forex trading account where 1 pip = $0.10, then you can risk HALF the amount of pips as dollars in your account.

• If you have $1,000, you do a trade that requires a 500 pip stop (500 is HALF of 1,000)
• If you have $300, you do a trade that requires a 150 pip stop (150 is HALF of 300)
• If you have $120, you do a trade that requires a 60 pip stop (60 is HALF of 120)
• If you have $50, you do a trade that requires a 25 pip stop (25 is HALF of 50)
• Get the idea?

Of course this works for accounts in US dollars using a leverage where 1 pip = $0.10. If you’re trading in a regular forex trading account where 1 pip = $1, then the HALF rule needs to be divided by 10 after taking HALF. If you’r trading with a different amount of leverage, you’ll need to adjust this rule accordingly.

Dynamic Forex Money Management

Every trade you do will change your forex account balance. It’s important to look at the HALF rule EVERY TIME YOU TRADE. This will allow you to dynamically change your trade size as your account grows.
Also, if you realize that you can risk 500 pips in a trade and the trade only requires a 200 pip stop, you will want to double your position size so you risk 400 pips. This helps your forex trading account to grow more rapidly, while still following the rules of forex money management.

Where to Get a 10-Cent-Pip Forex Trading Account

I’m recommending you sign up for  an eToro forex trading account for the free 90 day forex trading bootcamp. I’m recommending that you fund your eToro forex account with at least $250, so you will be able to follow money management and do most of the trades that we’ll be spotting.
Since the 90 day FREE online forex trading bootcamp is FREE, take the money that you’d normally spend on a forex trading course and put it into your eToro forex account. You can get a practice eToro account here. I suggest funding it with $250 as soon as possible so you’ll be ready for the bootcamp.
Why eToro?
eToro is probably the fastest growing online forex broker. There’s also a cool secret way for you to make money with eToro that other brokers aren’t offering. When we start the 90 day bootcamp, I’ll show you how to add some more money to your eToro account (you’ll love how easy this is).
I have been using eToro for about 2 months and I’m a fan. I’ve used other brokers, but right now I like eToro for people starting out with online forex trading.
We’ll be using some other free tools outside eToro for the bootcamp, but since you’ll be trading with real money you should start setting up your eToro account.

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