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Is there anyone willing to share their Money Management strategy?

Safwan Zolkipli (OMGTrader)
Jun 30 2010 at 20:14
9 posts
Hi Traders,

As we all know, there are 3 important ingredient in forex trading, there are:

1- System
2- Money Management
3- Psychology

Every forums and every websites I go people always emphasis on Trading System. Not many of them are talking about their Money Management. Is there anyone here willing to share their Money Management rules?

Steve B (stevetrade)
Jun 30 2010 at 20:24
1408 posts
I stake a certain percentage of capital per trade ( based on the pip value and the stop loss I am using ).

I generally set this between 1% and 5% depending on the strategy. I generally look at the figures using Kelly Criterion to decide the actual percentage. The higher Kelly is the more I will lean towards 5%, the lower the nearer to 1%.

I also take into account the number of trades per day. The more possible losses I might suffer in a day the more I will scale closer to 1%. It's not nice to come out of a day 25% down.

11:15, restate my assumptions: 1. Mathematics is the language of nature. 2. Everything around us can be represented and understood through numbers. 3. If you graph these numbers, patterns emerge. Therefore: There are patterns everywhere in nature.
Elkart
Elkart
Jul 01 2010 at 02:37
941 posts
Read this. It's an excellent example of MM.

https://www.winnersedgetrading.com/nytime-money-management/


'This may sound a little complex but it’s really quite logical. If the strategy starts losing, then it tends to lose several in a row. If this starts happening, we back off quickly, by reducing risk by 1% for each loss. If we’re back into winning trades, we gradually increase our risk level up to 4%, which is still reasonably conservative considering we only get to that if we have 4 or more winning trades in a row.'

Steve B (stevetrade)
Jul 01 2010 at 06:18
1408 posts
Interesting, good post Elkart.
I know that with Cast Iron Man the profit seems to go in cycles and this approach would definitely have paid off.

11:15, restate my assumptions: 1. Mathematics is the language of nature. 2. Everything around us can be represented and understood through numbers. 3. If you graph these numbers, patterns emerge. Therefore: There are patterns everywhere in nature.
Elkart
Elkart
Jul 01 2010 at 07:38
941 posts
I lot of people fail to pay attention to the role of streaks in fx. I'm sure if you look at the back tests you'll see some monster loser streaks there.

This approach does take care of it, but I'd advocate trading really small lots like 0.01 instead of nothing. Nothing is a bit difficult to code!!

CTSForex (winsor)
Jul 01 2010 at 16:30
303 posts
Hi 4REX Genie,

Both Steve and Elkart brought up good points. My take on MM is about 1) your target return per year 2) the maximum drawdown of your trading system in pips.

If you are planning to obtain 1000% a year, then you are setting yourself up for failure. One of my forex students brought his account from $2k to $20K within one month. I told him at the time that he was setting himself up for failure. He lost all his money within 3 days afterward.

Another friend that I know, brought his 4x account from $20K to $250K after 1 year of trading. He then lost all his money within 3 months because the market condition has changed. You must know the drawdown of your trading system over a min period of 10 years.

DoubleTrap (ForexSeeker)
Jul 01 2010 at 17:16
814 posts
The very basic Hit & Run strategy :

1. Divide your money into 4 part. Risk 1 part every month using high gain high risk tactic.

2. Harvest your profit every month and start with Risk 1 again.

3. If lose in the month, top up money to try your luck again.

4. Increase your risk gradually if the system work well.

5. Make it automatic and tested on demo first.

My track record on demo with 500 USD risk each month.

Oct (207.50%), Double
Nov (-62.18%),
Dec(192.44%), Double
Jan(64.08%),
Feb(-99.27%),
Mac(145.51%), Tripple
Apr(50.91%),
May(418.08%), Quarable
Jun(-63.03%),

Forex is a high gain high risk investment, you success if you has a high gain system.
You avoid failure by implement money management.
You get rid of Psychology by develop a fully automatic EA, then you find your truth freedom.

1- System
2- Money Management
3- Psychology

Information is Gold when come to organised.
Steve B (stevetrade)
Jul 01 2010 at 17:42
1408 posts
Why do you have to equate high gain with high risk?

Why not aim for low risk, high gain?

11:15, restate my assumptions: 1. Mathematics is the language of nature. 2. Everything around us can be represented and understood through numbers. 3. If you graph these numbers, patterns emerge. Therefore: There are patterns everywhere in nature.
SIM
pip2cash
Jul 01 2010 at 17:48
423 posts
Forex is not definitely high gain and high risk investment. It is depend on the trader.

SIM

SIM
pip2cash
Jul 01 2010 at 17:50
423 posts
Steve, are you sure do have low risk high gain in forex trading? If yes, please share with us.

Thanks in advance.

SIM

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