Money management is simply managing your money in a safe and effective manner in order to grow your trading account effectively where as risk management ensures that you manage the unavoidable downsides to your capital whilst trading.
Actually, most of traders can't distinguish these two things and they're convinced that money management is the same as risk management. Generally speaking, it's really like that. However, if we dive deeper, we note that money management implies only management of your capital and deposit, for example you decide how much money you are able to devote to particular position. When we speak about risk management, it also includes some management of your funds, nevertheless it also includes the risks inside your position, for example, if you see that your position is in minus, you decide what risk percentage you can afford yourself. You put 10$ on a bull position, and you see that you already have 6$ because there is a very strong bear trend. So, you tell yourself that if there would be 5$ and lower, you exit the trade. Of course, it's only when you trade without SL.
Imamul posted: there is any different between money and risk management ? most of the time i suppose, its all about same issue.
The purpose is the same, to protect your own trading balance from any kind of unbearable loss! In my trading I don’t take more than 1% risk reward ratio, and the main part of my own money management plan!
If you mean is there any difference between the two then yes, there is. Money management is basically setting a budget so you don’t go overboard with your capital fund and keep track of its flow. You calculate a risk reward ratio so you suffer some loss but still make profit, no matter how small or big the amount may be, which is the part of risk management. That is the difference between the two. Both are necessary to make successful trades.
Yes, there is a difference. Risk management is something essential to minimise potential losses in forex. There is a risk management system that should be set up by every forex trader. It includes setting risk/reward ratio, limiting risk per trade, calculating the risk for each trade, placing stop loss orders and more. But money management is more about managing your trading capital. Whether you use your profits for trading or withdraw it for personal needs would be a decision related to money management. How much capital you risk for forex is also a part of money management.
They’re definitely co-related, the amount of capital you invest in the market needs to be protected from the high levels of risk that could affect each trade when the market shifts. Money and risk management are two sides of the same coin so it’s important for traders to prioritise both.