Oil Trading Money Management Styles and Methods in Oil Trading

The best way to practice successful oil trading money management in Oil Trading is for a to keep losses lower than the profits they make. This is called risk:reward ratio.

Crude Oil Trading Account Management Techniques

This technique is used to increase the profitability of an investment strategy by trading only when you have the potential to make more than Three times more than what you are risking.

If you invest using a high risk reward ratio of 3:1 or more, you significantly increase your chances of becoming profitable in the long run. Oil Trading Chart below shows you how:

In the first oil trading examples, you can see that even if you only won 50% of your oil trade transactions in your crude oil trading account, you would still make a profit of $10,000.

Even if your win rate went lower to about 30% you would still end up profitable - Oil Account Management Principle - Oil Trading Money Management.

Just remember that whenever you have a good risk to reward ratio, your chances of being profitable as a trader are much greater even if you have a lower win percentage for your oil trading strategy.

Never use a risk : reward ratio where you can lose more pips one oil trade than you plan to make. It does not make sense to risk 1,000 dollars in order to make only 100 dollars.

Because you have to win 10 times which to make the 1,000 dollars back. If you ONLY lose once you've to give back all your oil trading profits.

This type of investment strategy makes no sense and you'll lose on the long term.

Crude Oil Trading Account Management Techniques

The percent risk method is a technique where you risk the same percentage of your account balance per transaction - Oil Account Management Techniques.

Percent risk based method says that there will be a certain percentage of your oil trading account equity balance that is at risk per trade. To calculate the percent risk per each oil trade transaction, you need to know two things, the percentage risk that you've chosen and lot size of an open oil order so as to calculate where to put the stop loss oil order. Since the percent is known, we shall use it to calculate the lot size of the oil trade order to be placed in the crude oil market, this is known as position size.

Example

If you have an account balance of $50,000 in your crude oil account & risk percent is 2 %

Then 2 % is equal to $1,000

Other factors to consider include:

• Maximum Number of Open Oil Trade Positions

A final point to consider is the maximum number of open oil trade positions that is the maximum number of crude oil trades that you want to be in at any one given time. This is another factor to decide when managing crude oil trading account capital.

If for example, you chose a 2 %, you might also say chose to be in a maximum of 5 oil trade positions at any one given time. If you open 4 trade positions and all 4 of those positions close at a loss on the same day, then you would have an 8% decrease in your trading account balances that day.

• Invest Sufficient Capital

One of the worst mistakes that traders can make in oil trading is attempting to open a oil account without sufficient capital.

The oil trader with limited capital will be a worried trader, always looking to minimize losses beyond the point of realistic trading, but will also be oftenly taken out of the oil trades before realizing any success out of their oil trading strategy.

• Exercise Discipline

Discipline is the most important thing that a trader can master to become profitable. Discipline is the ability to plan your work and work your plan.

It is the ability to give a oil trade the time to develop without hastily taking yourself out of the crude oil market simply because you are uncomfortable with risk. Discipline is also the ability to continue to stick to your oil trading plan even after you have suffered losses. Do your best to cultivate the level of discipline that is required so as to be profitable.

Managing Account Capital Basics

Oil trading money management, is the foundation of any oil trading system as it helps investors to improve their chances to get profit trading on the crude oil market. It is especially important when transacting in the oil trading leveraged crude oil market, which is considered to be probably be among one of the more liquid financial markets but at the same time to be also one of the riskiest.

If you want to invest successfully in the crude oil market you should realize that it is very important to have an effective oil trading strategy of oil trading money management because you will be using oil trading leverage to place your oil orders - Oil Account Management Basics.

The difference between average profits and losses should be strictly calculated, the profits on average should be more than the losses on average when trading, otherwise oil trading will not yield any profits. In this case an investor has to formulate their own oil trading account management rules, success of each trader depends on their individual traits. Therefore, every makes his own oil strategy & formulates their own oil money management guidelines based on the above guide-lines.

When you are placing your oil orders put your stop loss oil orders in order to avoid huge losses. Stop loss orders can also be used to lock in profit.

Consider the chance to get profit against chance to get loss as 3:1 - this risk: reward ratio should be favorable more on the profit side.

Considering these oil trading rules and guidelines, you can use them to improve profitability of your oil strategy and try to develop your own oil strategy that will possibly give you good profits when trading with it.