Writing a Forex Money Management Plan

Well since I am a real trader, I write mm plans routinely. So I am going to explain in detail how to write a proper mm plan. And after I explain it I will link you to a PDF with a sample mm plan. Even though it may seem slightly complex to start with this type of plan is very simple. It is also less than one page long and it has everything it needs to structure your trading.

Step 1: Write down your account Type & Size

Simply make a note of your account type and size.

Step 2: Write down your maximum target and stop in pips for each trade and the pair(s) you trade

 

Write down your maximum target and stop for the pair(s) you’re trading.
This is simply your maximum target and stop for a normal trade in your method/system. For some crazy reasons many trader set their maximum target and stop based on their mm plan. This is silly because you target and stop need to be based on the movement of a pair.
 

Step 3: Write down your goals

All you do here is write down your goals for the account. 

Step 4: Write down your rules

 

If you have any rules like the max draw down (you should have these kinds of rules) you add them here.

Step 5: Calculate and write down the maximum % risk on each trade

There are several schools of thought on what you max risk should be. I personally believe it should change with your account size.

Step 6: Calculate your maximum amount of lots traded on each trade

 

What You’ve Done So Far

What you have done so far is calculated how many lots you can take per trade. Now it is time to make a plan on how and when you will start trading more lots.
To grow your account the more money that you make the more lots you should start trading. However, you should obviously always stick to your 3% max risk.
So you use the mathematics above to figure out how many lots you will trade as your account grows.