Why can't traders make money? 99% of the time, it's because they overlook this key factor.

Have you noticed that even the most skilled traders can lose everything? While some seemingly “mediocre” traders consistently make profits? The secret lies in: Money Management (资金管理).

Many focus all their attention on analyzing charts and finding entry points, but little do they know that this is only 30% of trading. The real secret to making money is hidden in the other 70%—the scientific planning of MM forex.

Trading without Money Management is like gambling

Imagine this scenario:

You have a $100 account, see a “perfect” trading opportunity, and excitedly open a position with 50x leverage, risking all your funds. If the market moves in your favor, you make a fortune. But if it moves against you by 2%, your account will be wiped out instantly.

This is the consequence of not having an MM forex plan.

What about professional traders with proper money management? They use the same $100 account, risking only 2% per trade ($2), with a conservative leverage of around 10x. Even if they lose 10 times in a row, they still have $80 left. More importantly, they have the chance to turn things around.

What is the core of Money Management?

Simply put, MM is not about making more money, but about surviving longer.

It includes three aspects:

• Capital allocation: Don’t trade with living expenses
• Position sizing: How much risk per trade
• Leverage usage: How much borrowed money to amplify gains (also amplifies losses)

5 Unbreakable Rules of MM Forex

1. Live first, get rich later

The deadliest mistake is going all-in. Even if you are 100% sure the market will go up, keep some ammunition.

Correct approach: Only trade with money you can afford to lose. If losing this money doesn’t affect your life, it qualifies as trading capital.

2. Risk no more than 2% of your account per trade

This 2% rule is the trading Bible. For example, if you have a $10,000 account:

• Maximum loss per trade = $200
• If your stop-loss requires a $500 loss, then do not trade

Many beginners think 2% is too conservative, but violating this rule with one trade can wipe out three months of gains.

3. Leverage is a double-edged sword; choose carefully

The truth about leverage in MM forex:

• 20x leverage looks like a quick way to get rich
• But it can also lead to quick bankruptcy

Suggestion: Beginners should use 5-10x leverage, experienced traders up to 15x. Unless you want to play with adrenaline.

4. Stop Loss is not optional; it’s mandatory

Setting a stop-loss is like installing an “airbag” in your trade. Without it, one mistake can ruin everything.

Key point: The stop-loss position must match the position size, ensuring each trade’s risk stays within your 2% limit.

5. Write down your trading plan, don’t keep it in your head

Why do many traders trade emotionally? Because they lack a written plan to constrain their actions.

The correct MM forex process:

1. Write down the entry point, stop-loss, and target
2. Calculate position size based on these points
3. Review it again before trading
4. Execute

Just this step can help you avoid 80% of impulsive trades.

Practical MM Forex: 6 steps from failure to stability

Step 1: Calculate your “available trading funds”

Suppose you have $5,000:

• Living reserve: $2,000 (must have)
• Trading funds: $3,000 (can lose)

Trade only with this $3,000; no matter how much you lose, you won’t die.

Step 2: Determine the risk amount per trade

$3,000 × 2% = $60

This is the maximum amount you can lose per trade. If a stop-loss setup would cause a loss exceeding $60, reduce your position size.

Step 3: Calculate position size based on stop-loss

This is the core calculation of MM forex: