First of all I want to review the actual sense of Money Management:
Defense is for us as a trader who can make us still exist in the market, and still the next trading day after day.
There needs to know, "Distinguish between the stop loss level with the understanding money management (MM)"
Why?
The answer:
- Definition of MM is more to risk management
- Stop loss level part of risk management itself.
Hopefully can understand his words …
Jump to the subject matter, The Money Model-model/tipe Risk management can we meet in the forex market:
Martieangle
History records the MM type was originally created and in use in the world “Gambling” and finally applied in the world Tading.
Systems that run on every loss doubles position received with hope after double loss when a win could cover any loss of existing
Example:
0.01 + 0.02 + 0.04 = 0.07 (loss) under conditions Buy
Buy Winning in the condition in the following equation Lots 0.08 = 0.08 to 0.07 = 0.01 (Profit)
(As a parable calculation)
As for his role in MM is the direction of "probability"
Trading system is used by the ARM Expert Advisor of brothers Andrew & Team
Binnary Equation Method
MM system is also derived from the world of gambling … and then developed by a French mathematician Jean De De Allambrecth R’ondt.
The system is like this:
Any loss that occurs is recorded, but a win on the next trading in the new double line with a previous defeat, but with formulas specific calculation formula.
Examples of trading systems using this method:
Breakout System London, New York Breakout System, Break and Bounce Trading System and so on.
Averaging
MM is almost like Martieangle, only difference lies in the number of positions (lots) are derived remains the same, not duplicated like Martieangle.
Examples of Use of this MM is the technique of Dr. Median Grid. Forex
He trades only in the direction of the trend given by the Fundamental News as a whole,
As the case below:
0.01 Buy at 1.3200
prices turned down
0.01 Buy at 1.3100
prices were down again
Buy 0.01 at 1.300
(This averaging system works)
Hedging
This technique uses the correlation between several currencies as a form of locking or indirectly.
Example:
Directly, how it works:
buy 0.01 lots, sudden price moves against the direction of the position
0.01 sell to lock in losses
Are not direct, way of working:
eg EUR / CHF seems to want to go down, then sell 0.01 lot in EUR / USD
Sell and 0.01 lots on USD / CHF which is indirectly done hedging positions.
In conclusion, there are four methods of Money Management is more widely used in forex.
If there is one please straightened and enlightenment!!