Calculating money management in forex trading is crucial for risk management. Determine the maximum percentage of your capital to risk per trade, often recommended as 1-2%. Calculate the position size by dividing the risk amount by the stop loss distance. For example, if risking $100 with a 20-pip stop loss, and the pip value is $10, the position size would be $5 per pip ($100 / 20 pips). Adjust the position size based on account balance and leverage. Set profit targets to ensure a favorable risk-to-reward ratio, like 2:1 or 3:1. Regularly review and adjust money management rules based on account growth or drawdowns. Proper money management helps protect capital and ensures long-term sustainability in forex trading.
