Money management is the process of budgeting, investing, saving and expense tracking of one’s money, which is also called investment management. It is a strategic technique that is used to crop the highest output value for any amount of money spent.
It is the usual human phenomenon of sending money to satisfy desires. The knowledge of money management practice has been established to decrease the extent that firms, institutions and individuals spend on stuff that adds no substantial value to their assets, long term portfolio and living standards.
The technique of money management is used in trading and investment, where uncertainty is present. It deals with the query of how much risk a trader or investor should take. More precisely, what part or percentage of investor’s capital should be put into a chance to take full advantage of the investor’s utility function.
Money management provides a better idea of gaining control over incomings and outgoings in both business and personal perspective. It can be attained by establishing a reasonable budget and analyzing income and cost. It plays an essential role in future and stock trading. The key to fruitful money management is minimizing losing trades and maximizing winning trades.
Money management is one of the most effective defences in a trader’s collection. Due to the lack of money management concept, a significant percentage of forex traders fails. To always bet thousands of dollars, investors should know the importance of every coinage they are risking.
In order to have great control on money management, traders must remember that they are not in a casino or pool hall. Forex trade rules are opposite to maximize profit and minimize loss. For successful forex trading, never wager more than 1% of your principal equity.