So you are interested in trading CFDs, perhaps in MENA? You are not alone. Indeed, many people like you wish to start investing their money in the stock market. More often than not, most of them fail at it.
For example, most new traders have no idea what they should be doing, or how they can even begin making a profit with particular stocks.
Some of them will win some trades here and there, but they will lose their initial capital most of the time.
This is why so few traders succeed in this business – they don’t know how to manage their money correctly.
Money management is essential if your goal is to remain profitable over time rather than have a lucky streak now and then. The word itself could be defined as “the management of money as a means to an end”.
There are different ways to manage your money when trading CFDs, Mena, but almost all of them revolve around one single aspect – not losing all of your capital in any particular trade you make.
If you realise that you will need to win at least 55% or more trades out of a hundred, then this implies that 45% or less will cause a loss.
This sounds reasonable enough – if you were going to place bets on a 100-race horse race with your friends, what would happen if your only wins were the first two races while the rest of them would end with losses?
This is why you should be using a proper money management strategy while trading. Without it, you will be doomed to fail and live in regret for the rest of your life (if that’s something that concerns you).
Here are some other examples:
- Many traders don’t know what they’ll do if their capital ever gets exhausted;
- Lots of new traders think that they can get out of any trade at any point before the loser expires;
- Almost everyone who enters trading fails at determining how much risk they can afford to take on each particular trade.
If you happen to make these mistakes as well, then chances are you will never become successful in anything related to trading.
After all, this is not one of those “guesses and check” games , you can’t just keep throwing your money away until you hit the jackpot.
The most important thing that you need to remember when it comes to money management is that it is all about reducing risks.
You should always have a backup plan ready in case things go wrong, and you should also know when to cut your losses short if the trade is not going in your favour.
One way of doing this is by using a stop-loss order. This will automatically close out your position if the stock price falls below a particular predetermined point that you have set.
In this way, you can minimise your losses without manually monitoring the market all day long. Money management is a must. It will allow you to keep going even when your capital is being halved over and over again.
The second most crucial aspect you have to be aware of is how much risk you’re willing to take on each trade. This may vary for each trader, depending on their current condition and overall strategy.
For example, a new trader who’s been losing all of their trades thus far might want to avoid any high-risk transactions until they’ve built up enough confidence.
At the same time, an experienced trader who already has a lot of money in the bank could afford more risky manoeuvres and pursue more significant profits without worrying too much about potential losses.
All in all, trading CFDs Mena can be a very profitable venture if done correctly.
However, it’s essential to keep in mind that money management is key to success, and one should never risk more than they’re willing to lose.
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