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Do not put all your money in one trade

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  • Do not put all your money in one trade

    Before we begin our article, we want to tell you one short story. It is the story of a boy who used to go to the village market every morning to sell his eggs. He used many baskets to keep the eggs but one day he cannot find the other baskets. Time was running out and he put all the eggs in his one basket and went to the market. On the way, the basket broke down because it cannot take the weight and all his eggs were wasted. What do we learn from this story? We learned that we should not risks all our capital in one trade in Forex. When you are trading the market, you should remember that you are risking your money. This money is earned by your work and if you simply put all in one trade, you can lose your capital in one trade. This article will tell you why you should not risks all the capital in one trade.

    Importance of trade management skills
    Trade management is the most essential part of the Forex market. Majority of the Singaporean traders are doing well since they know the perfect way to manage their losing orders. Things might seem extremely easy in the retail trading industry but if you start to trade the real market you will understand the complex nature of the market.

    Use leverage in an efficient way
    Leverage can help you to execute big lot size but this can also increase the risk factors. If you tend to trade the lower time frame, it’s very obvious you will be placing trades with big lots. But this is not how the professional traders deal with the complex market. They always limit their risk exposure and focus on the market trend. In fact, the majority of the elite class broker will not offer you high leverage accounts. For this very reason, the novice traders often chose the average broker. But this is the biggest mistake they make in the CFD trading industry. Quality brokerage firm should be your top priority all the time. You need to have premium trading tools to deal with the complex market price movement. Learn money management very carefully so that you can deal with the worst-case scenario. And be prepared to take some break after losing few trades.

    You can lose the investment
    The first reason you should never put all your money in one place is if you lost the trade, you will lose the money. Think that if you have invested only 100 dollars in your account and you find a good trade and risk all your capital, what will happen if the trend change? You will have no way to get back your investment and all your capital will be lost. Do not think we are telling you a made up story because it has happened to many people. They think they we are going to make money and waited for a perfect trend. When the trend comes, they become overconfident and invested all their capital. The trends do not know if you are trading with a minimum amount and they changed. Many people have lost money in this way and we do not want that to happen to you.

    Why risks all your capital in one trade?
    There is no reason you should pace all the eggs in one basket. That was only a small boy but you are a grown up. You know what is good for you and you should make a small profit by risking even smaller amount. This is when the risks to reward ratio come to help. You begin to make money through your risks and this ratio tells you how much should you aim for investing. Try to spend your money wisely and do not put all the hope in one trade. The trends are unpredictable and always consider the risks.
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