Money management question

Beginner Questions
1

Just bolting down my money management system and have a question about how the more seasoned traders handle it.

I’m basing my money management on % of available equity

I calculate the potential loss and ‘equity margin’ of all open trades by multiplying the pip value by the stop loss then subtract this from the available equity. This ensures I can handle the swings

So if I have 3 open trades with 100 pip stops and $0.10 pip values that’s 300 x $0.10 I deduct from from the available equity figure I have to trade with (minus margins for new trades as well).

Now my question is - should I calculate the size of my positions (in accordance with my money management rules) on a trade by trade basis?

Or should I have a weekly position size for all trades that I review at the end of each week and recalculate according to the account balance and available equity?

Here are a couple of examples - let’s say I’ve seen a very nice valid entry to a trade:

[B]Option 1.[/B] Money Management - trade by trade on % of available equity

I have 5 trades open and my regular position size is 0.02 however the % of my available equity and money management dictate that for this trade I can only take a 0.01 lot size

[B]Option 2.[/B] Money Management - Weekly lot size

I have 5 trades open and my regular position size is 0.02. My available equity can easily handle another 0.02 position with my regular stop loss.

I can see the benefit of both options but I prefer option 2 because trade number 5 might be a particluarly good one and if my account can comfortably accomodate another position with my weekly position size I should take it.

Please bear in mind that my system uses intraday/position trading and trades are held open for days and sometimes even weeks.

2

It’s really your own personal preference. Either way you sound as if you have a solid grip on money management. For myself, I go trade by trade. That way if I’m on a nice win streak, it’s more apt to grow exponentially. Likewise, if I catch a losing streak, my losses shrink exponentially as well.

3

I agree… Each to his own.

I take my money out that I make as profit daily cos my lot sizes are fine for me to just takes a few pips a day. In my mind if I have less pips to chase in a day the easier it is for me. Less stress and the money is pretty darn guaranteed.