money management HELP!

[Black Knight]

Hi Under18,

I don't risk 3%, my maximum is 2% (meaning if I'm iffy on a position I often put on 1% or 0.5%). Yes, $30 on a $1000 account doesn't sound like much - but $1000 is not a whole lot to be working with to begin with (good enough for practice, but it is not realistic to expect to live from it). If you need more lots, you can always use a tighter stop, by the way - the system is adjustable from both ends.

But the real danger (and why 95% of traders bust out in their first 6 months) is if you put on a large position and lose, you'll spend the rest of your (short) forex career trying to get back to even (very few do, without additional deposits). Your broker won't throw slippage or bad fills at you until they see that you've bet the "big one".

My trading system may not be "sexy" or "exciting", but it is safe, consistent, and profitable - I trade with a bit more than $1000.

I am not in any way involved with knightsfx.com - that's another company, nor with BK Trading, which is run by Boris and Kathy from FXCM. BabyPips does not allow people to post links to their own sites, so you'll just have to Google "black knight forex".

Wish you good trading,

-=BK

[rhodytrader]

Originally Posted by Black Knight

If you need more lots, you can always use a tighter stop...

I'm sorry, but that's a horrible idea. Tight stops do not decrease risk, especially if you trade bigger.

Tight Stops Make Me Nervous

[Black Knight]

Originally Posted by rhodytrader

I'm sorry, but that's a horrible idea. Tight stops do not decrease risk, especially if you trade bigger.

Tight Stops Make Me Nervous

You're misunderstanding what I said. Obviously you cannot just arbitrarily bring stops in tighter - the stop has to be proportionate to your time frame and to your particular trading system in order to be effective.

I'm simply saying money management can be approached from 2 different angles... position sizing and stop distance. Strategies relating to stop placement, and management of positions once you're in them, is an entirely different conversation.

Apologies for any confusion.

[rhodytrader]

Originally Posted by Black Knight

You're misunderstanding what I said. Obviously you cannot just arbitrarily bring stops in tighter - the stop has to be proportionate to your time frame and to your particular trading system in order to be effective.

I'm simply saying money management can be approached from 2 different angles... position sizing and stop distance. Strategies relating to stop placement, and management of positions once you're in them, is an entirely different conversation.

Apologies for any confusion.

It's the "obviously" that's a problem. New traders don't intuitively realize what you've just said. That's why whenever I hear/read someone say what you did the alarm bells go off in my head. I've seen way too many traders say things like, well if I put my stop 10 pips away I'm keeping my risk small. They don't realize that while it's true that they may be lowering the amount of loss they are taking, they are also increasing the odds of taking that loss, so really they are increasing their risk (lowering the trade expectancy).

This is also where a lot of the "my broker ran my stops" complaints come from too.

Like you say, stop placement should be based on the rules of the system being employed. Generally speaking, they shouldn't be hit if the market is going to do what the expectations of the trade call for.

As far as position sizing and stop distance being seperate independent variables (which is what it sounds like you're saying), I disagree. They are totally linked together. You cannot change one without changing the other if you're using some kind of specific risk (1%, 2%, etc.). Of course if your risk is variable, then both position size and stop placement can be independent variables.

[Trade It]

Originally Posted by rhodytrader

As far as position sizing and stop distance being seperate independent variables (which is what it sounds like you're saying), I disagree. They are totally linked together. You cannot change one without changing the other if you're using some kind of specific risk (1%, 2%, etc.). Of course if your risk is variable, then both position size and stop placement can be independent variables.

Nice point, I agree.

[Black Knight]

Rhody - point taken on assuming what is "obvious" and what is not. Though I don't recall saying stops & position sizing were independent - quite the opposite:

"if you need to use more lots, you can use a tighter stop. If your strategy or timeframe requires a wider stop, then you need to use less lots."

Though, agree, best to add the addendum "but do not make stops tighter than your system or time frame calls for".

[rhodytrader]

Originally Posted by Black Knight

Rhody - point taken on assuming what is "obvious" and what is not. Though I don't recall saying stops & position sizing were independent - quite the opposite:

"if you need to use more lots, you can use a tighter stop. If your strategy or timeframe requires a wider stop, then you need to use less lots."

Though, agree, best to add the addendum "but do not make stops tighter than your system or time frame calls for".

It was your statement about money management being approachable from two different angles that suggest stops and position sizing being independent.

In terms of "...if you need to use more lots, you can use a tighter stop.", that's one I have a problem with. Needing to use more lots implies to me (and please some one tell me if they take it otherwise) that the trader is aiming for a profit target. In turn, that means they aren't properly concerning themselves with the risk first.

This is where traders get into trouble with tight stops. They want to make $1000 on a trade and can do so if it moves 100 pips in their direction using 10 mini lots (or a full lot). But they only want to risk $100, so they put the stop at 10 pips. They aren't thinking about where the stop should be put, just how many contracts they want to trade. It's all backwards.

[theunder18kid]

OHH I GET WHAT U GUYS ARE SAYING!!!! well ur both kind of right......... but hey rhody I'm not stupid.... BK is saying something kind of doens't make good sense... BK ARE U UNDER 18???? cause there are like kids who try to be intelligent and writes stuff to show their intelligence...... and then they stuff up by pointing something they shouldn't have pointed out lol..... both of your points are really basic..... but logical and useful...... even though I already know...... oh btw I have a 67% wining rate now with NO RESEARCH just charting and ye.... lol is that suppose to be good or really bad?.......

[theunder18kid]

how do I become a jr memeber?

[theunder18kid]

umm guys I just deposited 1k into my account and YES I WILL NOT RISK MORE THAT 5% or my account....... kind of stupid? well too bad for me none of you want to gime money. btw I understand what BK and rhody is on about.... I wish I am a jr member...... anyways wish me luck? haha thanks guys for your points. btw my broker doesn't give micro lots and I dont think I can find one that does.... even if there was one I cbf starting a new account. I am going to trade on this one and I HOPE I WILL UMMMMMMMMMMMMMMM BECOME>>>>>>> profitable? haha thanks guys once again