I wanted to open a tread for money managment as i say many people on here talking about there trading systems, and gaining x amount of pips.
What techniques could be used to sustain frequent losses while still making profit overall and how do some of you guys go around managing your accounts.
What advice can be given to gradually keep increasing your acount , how to do it, how to keep increasing steadily, sustain minimum losses.
I have heard some people say make sure your profits are always larger than your losses but how can you do this in a market so unpredictable where onceyou are up 2 pips and another time 150
I am talking from a 5-10K starting balalance.
Feel free to comment but keep it to the topic which is money management.
(English is not my first language so sorry in advance for spelling!)
Nice thread.
My view is that its the percentage that your account is up say at the end of a particular period(monthly, quarterly etc.) that should matters rather than the pip count.
Here’s a simple MM strategy.
A maximum risk of .5-2% of [U]deposit[/U] capital on a singe trade. Apply the risk to account capital each time theres a gain 50% or more to the previous capital.
Minimum Risk/Reward ratio of 1:2
Never expose more than 10% of account capital at any one time-if you are risking 2% per trade no more than 5 trades at a time.
With this MM strategy you can have a system that is 50/50 or less and still profit.(remember R/R is 1:2 or higher)
Whatever your account size is it will take you 50 consecutive losses to get a margin call with this strategy. And if that happens you have no place in this market.
Money management can be important. This means you will
lose money slower so you can play longer. Of course, playing
longer does not guarantee that you will end up winning.
Playing longer does give the illusion that you are in control of your
money. As long as you think you are in control, I guess
you don’t have to be the sucker in the game.
If you don’t know the sucker in the game, then it must be the
market. The market is the sucker because you got money management
on your side afterall.
So I say, yeap go for it! Reap all you can from the market.
First of all if a method has frequent losses and loses often either dump the method, fix it or find out what you are doing wrong.
The only way a method that loses a lot will make profit is if the winners are so huge they make up for all the losses and then have large profit past that. What happens whe you decide not to trade and miss your winning trade?
First thing find or develop an edge. And edge is very simply what ever method you use for trading. It should have a good win/los ratio and a good risk/reward ratio AND good money managment done by you. The higher both the ratios the better off you are.
First things first though, the first thing to develop is to be winning more trades then you lose consistenly. Next learn to cut your losses down to a minimum.
The very first thing you should consider in a trade is risk. Always think about what you are risking and ways to minimize loss on the losing trades. You will lose trades no matter how good the method. That is what sets profitable traders apart from blown accounts, the ability to accept a losing trade, minimize it, and move on to another trade.
Moneymanagement should fit your trading method the higher the success rate 75 % or higher the more you can risk.(not more than 2 percent)The entry and exits will also dictate percentage of capital on any one trade.Maybe you have a method that is long term (days) and needs room to roam so you will have to lower your microlots or units in play.I know of one professional trader in the futures market who can get to 1 point of profit 90% of the time so he allows 2 points of losses 1to2 ratio knowing he is going to show 15 percent of profit(minus commission).He bases this on over 500 live trades.Know your method in and out and sideways then apply the right moneymanagement to the methods limitations.
