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Five Money Management Strategies for Day Traders

Five Money Management Strategies for Day Traders

Without managing money properly, your business may not be able to stay in the market for as long as you’d like; technical skills are not enough to create longevity in the market. If you are not proficient in money management and leverage and risk management, you put your business in a high-risk position. Unfortunately, money management is not a skill that you can build instantly. It takes time, but here are five strategies to achieving money management skills to help you get started.

Managing Risk

To execute trade properly, you need to consider your risk to reward ratio. Normally, traders maintain the 1:2 risk ratio, which means for every one investment, you are predicting that you will receive double the reward. There are many variable factors which can influence the risk to reward ratio, and you can lessen your profit target to increase the probability of hitting the reward.


As a trader, you go through lots of ups and downs, and if you see a losing streak repeatedly, you might go through depression. When you open trade, you have some expectations, but the market is an unpredictable place. Here, you can see an instant profit, or great loss.

To reduce your stress, take a 10 to 15 minutes break every few hours as this will help you to feel better. You should remember that only observing the market is not enough for your trading, you have to analyze the information. Before analyzing, you need to be refreshed and clear in the head. To be fully prepared, you can meditate and strengthen your mental health.

Do Not Trade Emotionally

Sometimes, traders make an emotional decision because of the failure, but remember that you have to control yourself if you want to save your money. When facing a losing streak, many traders decide to take high risks which can finish their deposit. In this case, they do not think about their capital, they just want to make profits at any cost.

Overconfidence is also the reason behind high-risk trading. Sometimes, traders see a winning streak, and they think they will be able to make more money by taking a high risk. Your foremost duty is to save your capital, so do not take high-risk. Look for the low risk setups in CFD trading platforms, and never take trades with aggressions or emotions.

Be with Your Plan

As a trader, you need a strong plan, so you will first need to find out the requirements of the market, and where you want to trade. Then, make a plan. including stop-loss, take-profit, position management, and entry and exit point. After that, stick to your plan; do not trade more than what you decide.  Sometimes, you will see changes in the market, but after seeing that, do not make instant changes in your plan. Wait and observe the market. If you face loss, then think about where the mistake is, analyze the steps that you have taken, and if you think that your plan needs to be changed, change it.

Practice through Demo Account

If you want to improve your money management skills, you can trial your strategy in the virtual market, where virtual dollars are used for the buying and selling process. You do not need to invest your real money, but rather the virtual market will provide every single opportunity that the real market provides you. You can apply your strategy in this market and find out the effectiveness of your plan. If you find that it is working, execute it in the real market.

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by Marissa Collins //

Opinions expressed by contributors are their own.