This chapter will be the most important chapter you have read about trading.

Why is this chapter important? We are doing things that can make money. To make money, we must know how to manage risks (potential losses).

Ironically, this part is most easily overlooked in trading. Many traders only worry about whether they can enter the market correctly, but because of the size of their account.

After they simply determined the losses they can afford in a single transaction, they pressed the “Trade” button. There is a unified name for this investment…

gambling!
If you do not have money management rules when trading, you are gambling. You are not looking at the long-term return on investment. Instead, you want to win the jackpot.

Fund management rules can not only protect you, they can also make you profit in long-term transactions. If you don’t believe us, you think that “gambling” can make you rich. Consider the following example: Everyone who goes to Las Vegas wants to win the first prize. In fact, many people win. So if many people win, why can casinos make money? Because even though some people do get the first prize, in the long run, casinos are still profitable because they make money from those who don’t. This is why “the dealer is always the winner”.

The truth is that casinos are rich statisticians. They know that in the end they are the ones who make money—not the gamblers.

Even if Zhang San made $100,000 on the slot machine, the casino knew that there were hundreds of people who did not make money, and their money would flow into their pockets.

This is a classic case of statisticians making money from gamblers. Although both parties have losses, the statistician or the casino knows that anyone controls the losses. In essence, this is how money management works. If you learn to control your losses, you have a chance to profit.

Forex trading is a numbers game. This means that you have to make all factors as beneficial to you as possible. In a casino, the dealer has only a 5% advantage over other players. But this 5% determines the winners and losers.

You want to be a wealthy statistician, not a gambler, because in the end you want to “always be a winner.” So, what can you do to become a rich statistician instead of a loser?
Money can make money. Everyone knows this, but how much money does one need to start trading? The answer depends on how you will conduct your new business.

First of all, think about how you want to receive teaching. There are different ways to learn to trade: courses, tutors, self-study, or any combination of the three.

There are many courses and tutors that can teach you how to trade foreign exchange, most of which are paid. The advantage of this method is that a good teaching course or tutor can greatly shorten your learning curve. Compared to self-study, you can make profits in a shorter time in your own way.

The disadvantage is that you have to prepay the course fees, the price is several hundred to several thousand yuan, depending on the course you choose. For people who are new to trading, there is usually no resources (cash) to purchase these courses.

For those who can’t afford or don’t want to pay to study, the good news is that most of the information you need to start studying can be found online. You can find relevant information in forums, brokers, articles or websites.

As long as you have discipline and concentrate on studying the market, your chances of success will increase exponentially. You must be a good student. Otherwise, you can only live in a shabby room.

Second, do you understand that the market needs special tools, such as news subscriptions or charting software? As a technical trader, the chart suite provided by the broker’s trading platform is enough (some are pretty good).

For those who need high-end charting software with special indicators and better performance, it may cost $100 a month at the beginning.

Maybe you are a fundamental trader, and you have to see relevant information as soon as the news is released, or before it is released (isn’t it great).

Instant and accurate news subscriptions cost hundreds to thousands of dollars a month. And you can also get bonus news subscriptions from your broker, but for some people, winning or losing is a matter of seconds.

Finally, you need money/funds to trade. Retail brokers provide minimum accounts, which can be as low as $25, but this does not mean that you can enter the transaction immediately! This is your misunderstanding of total capital and will cause your transaction to fail. Loss is part of the trading game. You need enough capital to bear the loss.

How much capital do you need? To be honest, if you insist on trading and follow proper money management techniques, you will need between 50,000 and 100,000 trading capital at the beginning.

Most business failures are due to shortage of funds, which is common sense, especially in foreign exchange transactions.

If you can’t afford the loss, be patient, save money, and learn the correct trading method until you have a sufficient financial basis.