Hi all, i’ve been reading lots of books, articles and forex and whatever i can get my hands on. I have been demoing for quite a while and have seen many times that entry is only part of the system.
Defintely not the most important part as your money management and psychology place an even bigger part! So after these months im pretty convinced it’s true
Here basically is a laydown on my money management that i currently employed, and suited to myself. Im currently forward testing it as it defintely cant be back tested. So feel free to let me know how it can be improved or it simply is down right flawed or something.
I use 1% mm. So before every trade i would know where my entry and exits are. And i do employ multiple lots should the trade permits.
Firstly i enter and the trade goes in my direction 30% of my SL, i set it to break even.
After which when it goes to of 80% of my SL i take half of whatever profits should it retrace me. Meaning i would take a minimum of 40% of SL.
When it hits 100% of my SL (meaning r:r = 1), i start looking to add on additional lots. Usually down on a lower TF when pa is retracing. I would usually add on HALF of my initial lots. And i never let a winning trade turn into a losing trade, should my 2nd lot retrace and hit my SL. The most i get out at BE.
If the pa goes my way i will keep on adding additional lots on retracement. And i have a hard rule of taking off all my profits when i get 3 times SL.
Should i enter the trade and it goes 70% against my SL, i will exit the trade immediately if im there physically.
(With regards to maxmimum adverse excursion, which simply shows that if a trade goes so much against you, likely it will hit your SL)
So that’s about it, my laydown on my money management.
So this is my first post on baby pips!! A friend told me about this website a while back when I started looking into forex. Anyway:
As far as i’m concerned your 100% right on the importance of money management. Your rule of a 30% move to BE and 80% move to 40% I like as long as your have the right size SL. If you are using a 20 pip stop loss (Which I do in 2 of my systems) you may run into trouble. Because you are using precise percentages I will assume yours is much larger.
Also, I was using the same method of adding lots. I have found it more profitable in the long term to go ahead and use the larger number of lots (say 1.5 instead of 1). Firstly, you will gain that much more from your initial gain. Secondly if you monitor the short TF closely for a bias change/trand change you can close and then reenter after the short retracement. This hasn’t helped me make more money, per se, but it has helped me prevent a good deal of losses. Ocassionally that short retracement will turn into a major trend change on the larger TF. This saves me losing 30-40 percent of the pips I have gained while it goes down and hits my trailing stop. (I wouldn’t recommend this if your spreads aren’t really tight. I’m using oanda and EURUSD usually under 1 pip).
Regardless, your money management is obviously very well though out so I would dare say, if it’s not broke don’t fix it. Are you considering going live?
Hey grandmaster! Thanks for sharing your thoughts.
Yes you are right regarding having a decent size SL for the taking of min of 40% profit. My SL would usually range from 35 pips onwards. Anything below, i’d probably get whipsawed out of my trade. And the spread matters too like you said.
Correct me if im wrong, but you mention adding extra lots when my r:r is at 1.5? Thus any retracement i’d still get out with decent profits right?
I’m still forward testing my money management and results have been somewhat decent. Not losing overall, but not making a killing either
I’d go live when my trading journal suggest that i have an “edge” in the market. Probably couple more months of demo and i’ll find out if im ready.
And yes i intend to open an account with oanda, however my charting platform would be mt4.
Actually I was wondering if it would be more beneficial to, instead of adding extra lots, just try investing the full amount your going to risk. I have found, when I used a similiar money management technique that I BE far to often. The continuing retracement after entering the second lot would wipe out the profit of the first lot. After I examined the success rate of my system I determined it to be better to go ahead and risk the full amount I was willing to and let it run out. Adding lots, for me anyway, was far more trouble then it was worth.
This was true for me but it may not be the same for you.
You sure are taking a more intelligent route then I did. I jumped head first into forex when I saw the potential. Almost lost it all before I started making profit :D. Doing great now but I defintely wouldn’t recommend that choice lol.
