Money Management (MM): The Iron Rule to Protect Your Capital

Writer
Jan 25
2 min read

Money Management (MM): กฎเหล็กบริหารเงินทุนไม่ให้พอร์ตระเบิด

In the world of Forex trading, there is one sentence you must etch into your mind: "Protect your capital more than you seek profit." If you run out of capital (blow your account), your game is over instantly. Money Management (MM) is the strategic plan for how much you are willing to risk on each trade to ensure you can stay in the game for the long haul.

1. The 1-2% Rule (Risk per Trade)

Professional traders worldwide often follow this rule: "Never risk more than 1-2% of your total account balance on a single trade."

Example: If you have $1,000 in your account, risking 1% means you are prepared to lose no more than $10 on that specific order.
Why do this?: If you hit a losing streak of 10 trades, you will still have nearly $900 left to recover. However, if you risk 50% per trade, just two losses will wipe you out completely.

2. Risk to Reward Ratio (R:R)

This is the comparison between "what you are willing to lose" and "what you expect to gain."

R:R 1:2 means if you risk $10 to find out if you're right, your target profit must be at least $20.
The Advantage: Even if you lose more trades than you win (e.g., winning 4 times and losing 6), a healthy R:R ratio will keep your overall portfolio in the green.

3. Calculating Lot Size based on MM

Never choose your Lot size based on emotion. It must be mathematically calculated from your Stop Loss (SL) distance.

If your maximum risk is $10 and your SL is 100 points (10 Pips) away, you should use a 0.10 Lot.
If your SL is further away at 500 points, you must reduce your Lot size to 0.02 so that the potential loss remains exactly $10.

The Discipline of Survival: The Discipline Message

Applying Money Management is the ultimate test of discipline because it requires you to conquer your "Greed."

Don't Expect to Get Rich in One Trade: Many beginners try to "Overtrade" with huge lots, hoping to turn hundreds into millions in a single day. That isn't investing; it’s gambling.
Know How to Lose: A disciplined trader accepts a Stop Loss immediately when the price hits their plan. They don't hope, they don't pray, and they don't add more money to a losing position. They know that "There is always another opportunity, as long as you still have capital."

"A great trader isn't the one who makes the most profit, but the one who best controls their losses."

Next Lesson: Now that you know how to manage your money, we will assemble everything we’ve learned into a "Trading System." This will give you clear rules on when to enter and when to exit the market without relying on "gut feeling."