The Investor Diary Entry #84: September 11, 2025
This article is a reflection on my own trading journey. I am documenting my process and the lessons I am learning along the way. I am not a successful trader yet; I am on the path to becoming one, and a crucial part of that path involves building a solid plan. I have come to understand that a trading plan rests on two main pillars: the trading strategy itself and a personal money management system. The money management system is a core component of overall risk management. I recently had an experience that showed me, more clearly than ever, how my money management system directly controls my forex trading decisions.
I had planned to start discussing the specific trading strategy I am testing, which I learned from a detailed YouTube series. I’ve adapted it to fit my own style, which I believe is a key step in making any plan feel solid. However, a trade presented itself that perfectly illustrated the power of money management, so I felt it was important to share that first.
A Textbook Setup That I Walked Away From
The trade was on GBPCHF on the 1-hour chart. According to the rules of the strategy I am learning, the setup was there. The price was within a defined trading range that was moving downward, suggesting a short position was the play. I identified the low of the range, watched for the price to react upwards, and then looked for a specific area where it could reverse back down into the main downward trend.
I found a potential entry point. However, when I measured the distance to where I would need to place my stop loss, it was 45.9 pips away. This is where my process for making forex trading decisions begins. I don’t just look at the chart; I look at what the chart means for my account.
The Numbers That Told Me “No”
I opened my position size calculator. My starting risk on any trade is half a percent of my account equity. My demo account balance was around $963 at the time. I plugged in the 45.9 pip stop loss distance to see what lot size that half-percent risk would allow.
The calculator showed it was less than a micro lot, which no platform I know of would allow. I then considered my personal money management system rules, which allow me to adjust my risk on a per-trade basis within a range from 0.5% up to 1% for stronger setups. I increased the risk percentage in the calculator to see if I could get to a reasonable lot size. Even at a higher risk percentage, the numbers did not look right. The potential position size felt out of balance with the trade’s potential.
Next, I checked the risk-to-reward ratio. Even if I placed my stop loss exactly at the high of the range as the original strategy teaches—which I sometimes adjust to account for market liquidity—the ratio was calculated at around 1:1.92. My personal rule is to aim for a minimum of 1:2. It was close, but it was not there. The combination of the wide stop and the sub-2.0 reward ratio made the trade unappealing. The potential profit simply did not justify the risk I would have to take, both in terms of capital and the psychological stress of managing a trade with a wide stop.
This entire calculation is how my money management rules my forex trading decisions. The strategy said “maybe,” but the math said “no.” Being disciplined and sticking to the pre-defined rules of my system meant I could walk away from the trade with confidence, avoiding a situation where I might question my own actions later.
How My Money Management System Handles Multiple Trades
The other part of my money management that guides my decisions is managing total account exposure. I have a rule for the combined risk of all my open trades. My ideal total exposure is 3% of my account equity, meaning if every single open trade were to hit its stop loss simultaneously, I would lose 3% of my balance. I can tolerate up to 6%, but that is my absolute upper limit.
On this day, I had seven open trades. Using my spreadsheet to filter them, I could see that the total exposure from all these positions was 3.63%. This was within my acceptable range and well below my maximum tolerance. This system allows me to sleep at night. Even in a worst-case scenario where all seven trades lost, I would still be in the game. I could recover from that drawdown.
This exposure limit also influences my initial risk decisions. If my exposure was already at 5.5%, taking a new trade with a 1% risk would push me over my 6% limit. Therefore, my money management system would force me to either reduce the risk on the new trade to a minuscule amount or, more likely, skip the trade entirely. It acts as a governor, preventing me from overloading my account and ensuring my forex trading decisions are always made with a view of the entire portfolio, not just one exciting setup.
The Psychological Safety of a System
This process is what I am learning to trust. Seeing trades that look good on the chart but get filtered out by my money management system proves its value. It removes emotion and guesswork. If a trade does not agree with the rules I set for myself, I should not take it. This discipline is what I believe will protect my account over the long term.
Even if I had taken that GBPCHF trade and it had won, the profit would not have been substantial enough to justify the exception. Making a habit of breaking rules for almost-good-enough setups is a dangerous path. This experience reinforced my belief that a personal money management system is not a constraint; it is the framework that provides the freedom to trade without fear. It is the key to maintaining a calm psychology during both winning and losing streaks.
What I am learning from both the backtesting and the demo account is invaluable. I have been on live accounts before, and for years, but now when I come back on a live account, it will be a whole new ball game for me.
I am excited to continue documenting this journey and to eventually share more about the trading strategy side of my plan. But this example was too important to skip. It shows that the most sophisticated entry strategy in the world is futile without the strict, unemotional discipline of a personal money management system to guide your final forex trading decisions.
The Investor
Thursday 11 September 2025
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second, as a place where I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links, I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
This blog is also part of something else I’m learning: blogging. I’m using a platform to learn that part. And if you’re interested in that it is called Wealthy Affiliate, look it up.
For more detailed information on my affiliate disclosure, please refer to the Full Affiliate Disclosure page.
Furthermore, this site is in no way or form giving any financial or investing advice, nor is it encouraging or discouraging people to buy or sell any financial instrument. This is a personal diary in which I track my own progress and share it for informational, educational, and entertainment purposes.