i would like your expert opinion on my planned money management scheme. i plan to trade starting off with just 300usd with a simple trading strategies, yes with an S :rolleyes: coz i plan to use 2. well my money management is based on fixed ratio of 1:2. 20pips target with a 10pips SL. I will take 3% risk till i reach 2500usd approximately 39 winning trades and a total of 780pips. then i will take 2% risk till i reach 10000usd w/c would take me about 38 winning trades and a total of 760pips.
I know I based my money management on winning trades and less focus on the drawdown … well, I would like to think positively :p.
Please feel free to input your expert opinion. Happy trading
I hope you’ve fully tested your strategy because a fixed pip stoploss can be a recipe for disaster if you haven’t properly accounted for current volatility, especially one as small as 10 pips.
Firstly there’s no point telling is a 10 pip stop when we dont know the time frame. 10 pip on a 4H chart is nothing, you’ll lose every trade.
Furthermore, if you are using 4H 20 pip isn’t much to aim for if you see a trend forming. A trend on a 4H is massive compared to a 5M chart.
Secondly, are you using demo, if so good. If you’re using live, then why 2 systems, unless they do different things, (for example one for market opens, and the other for normal session times). If you are testing which of the 2 strategies is best, don’t do it on a live account.
Even on EU, with a 10 pip SL you are going to get stopped out a whole lot more than you hit your TP.
You have to account for the spread. Lets just say it’s EU you are trading with a 10 pip SL. At my broker I get a 2 pip spread almost always on EU.
If you enter a trade with a 10 pip SL on EU, you are automatically negative 2 the spread. So, what you really have is an 8 pip SL to make 20, which, frankly is rarely going to happen.
Your account will die the death of a thousand cuts.
At the very least try a 20 pip SL with a 20 pip TP. At least that way every winner will erase a loss. And has some breathing room to actually make 20. Even that is pretty tight, but at least do able with a good entry on slower pairs like EU.
Fixed ratios will kill your account. Just because you are going for 2:1 there is no guaratee it will happen consistently. From personal experience I can tell you that almost never happens on short term, low pip trades. Those 2:1 3:1 risk reward set ups rarely happen on anything other than longer term trades with very large SL’s that last for days weeks or even months.
Better to find a good entry method and find out what the average win is before it reverses back to your entry and or into negative. Then lock that in with postive SL and just hope it keeps going your way.
P.S. if you like scalping for small pips try the cobra indicators. Just search cobra on forexfactory.com easy to use. I use a combo of his stuff on EU with a 30/30 risk reward ratio on the 1H charts. Works pretty good. Once it gets to 30 pips I lock it in and hope it keeps going. If it does I lock in every 30 pips from there. I look for a cross on the 1H or one about to happen, then drill down to the 5M and enter on a cross of that.
Basically cobra is a trend following indicator set. I try to figure the direction at 7 A.M. , get in and hold till 10 or so if I can. But, I always lock in 30 pips. This is what I do when I dont have any long term set ups.
Math always looks good on paper doesn’t it. But don’t let it fool you, experience is what you need. The market is always changing, so look for areas of support and resistance to determine profit targets and stop losses. Thereafter you determine your lot size to accommodate your risk management.
