Money Management and Funding Your Forex Account

Filed under: Learn Forex Trading |

Screen shot 2013-01-21 at 10.37.14There are many things to consider with regards to forex money management and funding your account. For me, I think that it is a good idea to set aside a certain amount of money for trading with, but that does not necessarily mean that you have to keep that full amount in your trading account.

 

Let’s say, for example, that you have 5000 pounds (or dollars) set aside for trading with, and that you can afford to lose this money if things go wrong. Now, you have two choices. You could put the whole 5000 pounds in your trading account, or, you could do what I do, and put a portion of that 5000 in your trading account, and top up as necessary. ‘Why do you do this?’ I hear you ask. Well, by putting say, 1500 pounds in your trading account, this should cover any margin calls for the time being (as long as you are not trading in high volumes), leaving the rest to be put into an ISA or a saving account to accumulate some interest. 3500 pounds in an ISA at a rate of around 3% interest would give you about 100 pounds over the course of a year. This is not going to make you rich of course, but if you are trading at a level of 1% risk of your 5000 pounds per trade, this means that your trading account is up by 2% already!

 

If you start to lose money, then you can always top up the trading account, and if you start to make money and a surplus begins to form, then you can even withdraw some funds and add it to your savings account. To me, this kind of money management makes sense, as it keeps your money working for you.

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