Hi guys,
I’ve got a question. Say you have an indicator that you find to be reliable (that is, higher than 50% reliable). What money management system do you use? Do you simply buy when the indicator says to buy and sell when it says to sell? Do you stack multiple buy orders if you receive confirmation that the price is indeed going up? Do you try to insure your buy orders with sell orders of smaller lot size if you think the price will reverse? Do you increase your lot sizes in proportion to your equity? Inquiring minds want to know 
All I do is risk 2% of my account per trade. That’s about as simple a MM strategy as you can get and it’s all you need!
^^^This, I like to stick 2% a trade, it’s been working for me so far.
Mine is the one where I leverage the crap out of a trade and it makes me mountains of pips! Which brings up my least favorite MM strategy, the times when it doesn’t…:eek:
Seriously though, the best one does seem to be the 2% rule. I am working on properly integrating that into my strategy.
I do increase my lot sizes incrementally using a 4-5% rule for that. Example, 5k balance gets 1 lot (5k = 5% of 100k). This works well to grow an account as long as you watch what you are doing as the pip values increase.
I will not add to trades anymore, it works a lot of times but when it doesn’t my life is pure hell trying to fight the leverage monster. I have heard of incrementally adding trades to build up to a full size trade, that could work to but I don’t like the complexity of it.
Mine is the one where I leverage the crap out of a trade and it makes me mountains of pips! Which brings up my least favorite MM strategy, the times when it doesn’t…
Seriously though, the best one does seem to be the 2% rule. I am working on properly integrating that into my strategy
Funny and a good plan!
I use a dollar amount I will not let my floating balance fall below. That amount is 4% less than whatever my balance is when I start trading for the day. I use discretion on the size and risk on each little trade. I stop if I lose 4%. I make 5 to 10 trades a day usually I size them so a few losers won’t make me have to stop trading. Some times I hit a 4% loss most days I don’t. 4% might sound like a lot but its the same as if phill or some one else lost 2 trades in a day at 2% each. Its not complicated I just watch my balance.
Thanks for the replies. What would be the formula for determining how many lots is equal to 2% of my balance?
There’s a lot more to money management than just buying or selling on your signals, or increasing lot sizes.
Risk to reward.
Where to most effectively place your stop.
Exit strategy.
Configuring lot size to r/r…
On and on…
I use one lot, figured of course based on my stop loss requirements.
Occasionally I’ll scale in a lot or two, but that happens based on retracements. And I move my stop loss in accordance to make sure I lock in some profit in case it’s an all out reversal.
2% risk from what I have gathered has to do with stop loss placement. If you only risk 2% of $1000 that number is $20. So, based on your desired trade size you would place your stop so that the most you would lose is 2% or $20. If this causes your stop to be too tight and you keep hitting it all the time then it is time to either decrease your trade size to increase the pip buffer between you and the stop or increase your risk percentage.
My 4-5% trade size determing rule is different from a 2% risk amount. I am by no means an expert in determing or managing risk so searching the forum for more technical explanations would be a good idea.
For finding what number your balance is 2% of:Math Goodies Problem 6
Not quite… I never base my stoploss on my risk, it’s the other way around. As ThePhoenix says, “You can’t trade off a calculator.”
I base my stoploss on what the charts are telling me, then trade whatever lot size will give me 2% risk.
If 2% of your account is $20, and your trade needs a 50 pip stoploss then divide 20 by 50 and you get .40. That means you need to trade 40 cents per pip.
40 cents per pip is 4 micro lots, 0.4 mini lots, or .04 standard lots, so trade accordingly depending on your account type.
If you’re really picky and want exactly 2% you’ll need to factor in the conversion rate for pairs that aren’t based on USD, but I never do. Your trade will always be close enough to be safe no matter what.
I do like that formula better, it assumes that you know what you are doing and not just trading like a robot. I never did like methods that downplay my ability to use my brain. I may have to add your technique to my toolbox now that I understand this a little better.