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Is there anyone willing to share their Money Management strategy?

Chris
Krysztau
Jul 09 2010 at 18:00
posts 68
I got my point on MM too,
as a manual trader I prefere to get used to numbers I see in 'profit' row. So I prefer to trade always the same size of position, so always one pip mean more or less the same amount of dollars.
One day when I will see my account get to a level where I will decide to rise risk amount [let's say when I double my account] I will not rise it as it is, but will wait for some loosing trades [les't say if my average DD is 7% I will wait for loos of 5% and than will enlarge my trading size as planned - this would be like saving some stack. [of course this will be different when my hit ratio will be 94%.

Take this into consideration:

If you loose 1% and than gain 1% of that 99% account, you are 99,99%.
If you lost 10pips on 1 lot size than gain 10 pips you are back in 100%

BUT My stops are always around 30-40 pips an I usually close before they are hit, so if you like my MM idea you must take in consideration that my risk in pips is quite constant...

Paul Ng (paulng)
Aug 15 2010 at 14:51
posts 43

Elkart posted:

'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.'


I have a different view. I think it all depends on the combination of strategies deployed. For my system, if I size down as described above, I will be on a much smaller size when the winner comes. That defeats the purpose of risk/reward planning. Similarly, if I size up during a winning streak, the next loser will be a big hit to the account. So personally, I'd keep things simple. Perhaps size = 5%, maximum loss = 2%, or some other ratio that will not have a significant impact on trading size during periods of drawdown, so that the account can recover.

"The first rule of forecasting should be that the unforeseen keeps making the future unforeseeable." - David McCasland (January 5,2012, Our Daily Bread)
DoubleTrap (ForexSeeker)
Aug 15 2010 at 15:44
posts 814
My New Money Management Concept.

1. Risk what you can afford to lose in a month.( For me I set $500.)
2. Set your strategy to earn the max ROI. ( I increase lot size double up.)
3. Set the EA to stop trading when reach optimum ROI. ( My case 75% ROI)

Previously no have Rule no.3. As not yet do analysis to find the best ROI to opt out.
With 75% target hopefully it will be consistent.
As my previous setting will let it run whole month will have up and down ROI.
For long term it might work well as 10 month to get average ROI 92%.
But for short term to get consistent money to withdraw out, 75% is a good choice.

<a href='' target='_blank'><img src=''/></a>

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Information is Gold when come to organised.
Pipsology (Pipsology)
Aug 19 2010 at 18:12
posts 11
4 me, i dont let my stoploss exceed a certain percentage, i always allow my profits to be highe than my stoploss, in that way am save

Patience Is The Best Stractegy In Forex
jpkfox
Aug 21 2010 at 13:22
posts 51

Elkart posted:
    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.'


This is what I also do: I vary my trade size according to my winning trades. I have found personally (just my opinion) that after a big winner its better to trade small couple of trades and then increase the size. This works propably on a long term better. But must give time like 1-2 years this to work. But I would not recommend this generally to any system... it seems to work for my systems.

Freedom is a paradox; To be free to play beautiful music, you have to submit to the rules of music.
Soccerhed
Aug 22 2010 at 22:00
posts 1
I use a table to calculate my lot size based upon 1 lot per $4,000, then set a profit of 5%. This will change to $5000 at my next level, $6000 at the next and eventually 1 lot per $10000 (if I am good enough) I trade 1 pair EURUSD and use a combination of 5 indicators to enter on 1Hr. My indicators all agree about 7 times a week out of about 55 opportunities a month . And never enter in late NY afternoon

If the average movement is 1300 points per day, I need 226 out of 1300. Makes it much more doable. We tend to make this so complicated that when we make a mistake or have a loss, we look for a new 'way'. When most times, if you have done the work beforehand, it was a loss that the market handed you and not your system.


Dollars PIPS Pips plus Spead
1% $171 40 66
2% $343 80 106
3% $514 120 146
4% $685 160 186
5% $857 200 226
6% $1,028 240 266
7% $1,199 280 306
8% $1,371 320 346
9% $1,542 360 386
10% $1,713 400 426
11% $1,885 440 466
12% $2,056 480 506
13% $2,227 520 546
14% $2,399 560 586
15% $2,570 600 626
16% $2,741 640 666
17% $2,913 680 706
18% $3,084 720 746
19% $3,255 760 786
20% $3,427 800 826
25% $4,284 1000 1,026
30% $5,140 1200 1,226
35% $5,997 1400 1,426
40% $6,854 1600 1,626
50% $8,567 2000 2,026
60% $10,280 2400 2,426
70% $11,994 2800 2,826
80% $13,707 3200 3,226
90% $15,421 3600 3,626
100% $17,134 4000 4,026

Soeren (GridsForPips)
Aug 23 2010 at 00:06
posts 205
Go with fixed lots until you reach a certain profit% gain like double your account, take out half the profits, increase fixed lots according to the new balance (150% of original), double again, take half profits, rinse and repeat. Hold some of the withdrawn profits in a separate account, for the purpose of reinvesting should the tradingaccount get blown.

When you reach a monthly profitwithdrawal of your satisfaction, continue with the same fixed lots forever, this way, as your account grows, you lower the risk and make the account grow until retirement.

Depends of your tradingstyle of course.

Cheers

Soeren

Always get cashback -
Chris
Krysztau
Aug 23 2010 at 07:21
posts 68
What I can say for sure - lowering your trading size on losses [just to keep 1% risk or whatsoever] is a worst thing one can do ever. In other hand I by myself use different sizes dependably on how do I feel about a trade I open...

jpkfox
Aug 23 2010 at 08:37
posts 51
Krysztau posted:
    What I can say for sure - lowering your trading size on losses [just to keep 1% risk or whatsoever] is a worst thing one can do ever.


I am not sure if this is correct. With some systems its possible that you get a very long rows of losses or some small winners only. This can be like a 60 trades. Then this system can start to give winners again. Now, if you use smallers size (even zero size maybe) for the 40 trades can possibly save a lot of drawdown for that system. If you use 1% risk for those 40 losses, you would lose something like 30% of your capital but if you use zero size you dont lose anything. Then you get a big winner *for a bigger capital*.

An example: Say you deside to put 0% (not trading at all) after 20 consequence losses with a certain system. Say your money is at that moment $100. You deside to continue after next bigger winner comes (market comes 'back'...). Then, let say, the third trade after that winner is also a big winner, say 15% winner. So in this case you get 2 losses and 1 winner:
Total balance after = $100*0.99*0.99*1.15 = $112.7 (risk per trade = 1%)
   Lets consider next the situation you always use fixed 1% for all trades. In that case you would get 40 losers for that $100 capital. Lets say the winner is 10% after those 40 losses. Then, like said in the first case, we would get 2 losses and one 15% winner. So the total balance would be after all of this:
100* (0.99) (to power 40) *1.1 *0.99*0.99*1.15 = $82.9.

So the first way of changing the size would give $112.7 and the second fixed way would give only $82.9. The reason for this is that the capital goes all the way to as low as $66.9 for the fixed system. So its difficult to come back from such a loss.

But this way of changing size must be done after very careful research... it would not work just by guessing when to change size. And it does not work for all system. But it can work nicely for some systems...

Freedom is a paradox; To be free to play beautiful music, you have to submit to the rules of music.
Chris
Krysztau
Aug 23 2010 at 16:18
posts 68
'for some systems...'
that's the key ;)
Personally if I designed system that generate 95% of loosing trades I wouldn't bet 1% of my account [btw if you could point one such a strategy here on myfxbook, I would be amazed and interested]

additionally I tried some systems that generates row of small losses and than big gain [not martingale however] and to manage trades I treated every row of losses as a one trade...

jpkfox
Aug 23 2010 at 16:31
posts 51
I have a (very) good system I have been doing 3 years live. It has every now and then 45-60 row of losses or small winners (winners less than +100, with stop loss of 20). It has always then given that big winner... and goes again... It seems to me that there are seasons when the system gives a lot of losses in a row, and then it works again. Just my observation.

Freedom is a paradox; To be free to play beautiful music, you have to submit to the rules of music.
Chris
Krysztau
Aug 23 2010 at 18:00
posts 68
As I see from your chart you base on those big runs in the first place. So I suppose you don't risk more than 1% and as seen from statement your average loss is 0.3%... and bigest loss is 0.85%...

So it somehow fits what I said earlier...

jpkfox
Aug 23 2010 at 18:53
posts 51
I do a lot of trades, thats why I have to keep the risk of one trade small. Yes, my systems are based mainly on big runs. But if you look at the whole history of EUR you can see that EUR has always been running up and down a lot, so my systems just take advantage of that. Yes, somebody can say 'but what is EUR stops trending'... well, what if EUR stops ranging!!!?? :) heh, and ... EUR has NOT stopped trending for last like 20 years, so I think it makes sense to think it continues...

ps. I also do range trading, but obviously their winners are smaller and do not grow the balance up much.

Freedom is a paradox; To be free to play beautiful music, you have to submit to the rules of music.
Chris
Krysztau
Aug 23 2010 at 20:49
posts 68
Well,
I think EUR trends on some solid fundamental basis, in case those basis are no longer true you would easily realise that. However still there will be some other pair trending in such conditions...

exa96995
Sep 14 2010 at 00:15
posts 8

OMGTrader posted:
    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?

all three matter

fixed lot, the size of lot and deposit depend on the past drawdowns

Forex Refuge (ForexRefuge)
Sep 14 2010 at 18:13
posts 92

exa96995 posted:
    
OMGTrader posted:
    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?

all three matter

fixed lot, the size of lot and deposit depend on the past drawdowns



I totally agree with you pal.

The point is that many traders see fx as a quick money maker and they throw all caution to the wind just to later blame themselves.

I have been trading forex for about two years and i have come to understand that good money management is the only way out.No matter the trading strategy/robot used.

This is the way i trade using good mm

As a swing trader,i use not less than 200pips as stop loss to allow for crazy price action. Never the lessmi make sure that the 200pips is equal to 5 to 10% of my equity.

So here is a formula i use.

equity/100 x 5% =5% of your equity. so to get a lot size to use,i simply divide the 5% by 200pips.

so assume that i have 10,000 equity. that will be 10000/100 x 5% =500usd then 500usd/200pips sl = 2.5mini lot size

so i will use 2.5mini lot.

though i use 10% sometimes as i am very confident of my trading method.


i hope this helps.

Success in Forex Trading is a marathon and not a sprint.
justgbp
Sep 14 2010 at 21:10
posts 9

OMGTrader posted:
    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?


1- System: You must have a winning system or your money management and psychology won't do any good for your trading. I believe most systems available or you can find from the internet are profitable if you have 2 and 3 but only traders who are good at 2 and 3 can be profitable.

2 - Money management: If you have 1, you must have 2 to trade profitable. Traders must limit their risks on each trades with great R:R ratio. I place 15 to 20 pips stops and 46- 80 pips TPs on every single position with 10 to 1 leverage. It means I risk 2% or less for 4% or more profit.

3 -Psychology: Traders must be good or perfect on 3 if they have 1 and 2 to be a long term profitable winners. This is the most important aspect of trading assuming you have reasonable 1 and 2. And this is the hardest aspect for traders to have. I personally work on this part every minutes and still feel that I need so much improvement to be considered a long term winner. I tell myself that I must enjoy manageable drawdown. I am working on a plan to ensure I can truly enoy my losses.

I hope this can help most traders.

I must be a better person first before I can be a profital trader.
Forex Refuge (ForexRefuge)
Sep 15 2010 at 05:40
posts 92
In my Trading experience,if there is one thing i see as very unrealistic,it is the issue of risk/reward. Expecially for short term traders.

Price movement is way too random for 20pips/50pips stop loss as you may see your stops getting touched often.

To trade forex with absolute peace,you must understand that placing stop loss is not just about risk/reward but we have regions of strong supp/res levels and your stops should be safely placed below a strong support if bullish and above a strong res if you are bearish.

Your money management decision must be based on your trading method.

If you are a day trader/short term, you should definitely consider using stop loss between 100/150pips to give room for short term random moves and if you are a swing trader who looks to capture big moves,you should be looking at 200/300pips as stop loss but if you are a position trader,yu may be looking at 500/1000pips stop loss whereas, a scalper is at the mercy of random moves because 20pips/30pips stop loss is most unlikely to give you consistent profits.


So i do agree that a good trading system comes first,then great discipline to follow this system then a very sound mm which is by far very crucial in your success.

Thanks

Success in Forex Trading is a marathon and not a sprint.
exa96995
Sep 15 2010 at 07:12
posts 8
system, mm, and discipline - three elements that make trading profitable
so everything goes first

1/ system must have a winning edge i.e. profits larger than losses

Example: entry point - buy stop on day's high
             exit point - sell stop below day's low
Note: keep it simple
good testing (without curvefitting) on history data will show system performance in the past -> past performance does not guarantee future success


2/ mm - this is the size of the position

Method one: fixed percent
Formula: the number of lots =(deposit*fixed percent)/(the size of stop-loss in pips*the cost of one pip in one standard lot)
Example: ($10 000 * 0,01) / (50 * $10) = 0,2 lots
Note: the less is fixed percent (usually below 3%) the less is the degree of risk (and the profit);
the size of stop varies depending on trader's system
Advantages: in good times profits larger- in bad times losses smaller -> system adjusting to the market
it is very difficult to lose a lot using 1-2% fixed percent
Disadvantage - constant calculation and entering the good times with smaller lot

Method two: fixed lot
Example: history tests or trading with one fixed lot showd that the maximum historical drawdown of system was $10000 that means a trader must have at least $10000 on deposit to trade one fixed lot.
Note: the maximum drawdown is still to come that means the more money on deposit - the less will be the drawdown
Advantages: no complex calculations, consistency
Disadvantages: to get sound profits large trading capital is a must

3/ disciple - following the system and mm rules
failure to follow the rules means that a trader fears to lose current or future profit
we fear because we value money, goods and our consumer way of life
in order not to fear one must change his values or deposit the sum he/she doesn't afraid to lose

good luck
  

Chris
Krysztau
Sep 15 2010 at 08:24
posts 68
ForexRefuge posted:
    In my Trading experience,if there is one thing i see as very unrealistic,it is the issue of risk/reward. Expecially for short term traders.

Price movement is way too random for 20pips/50pips stop loss as you may see your stops getting touched often.



/i must disagree but only partially. My general strategy is to trade around key levels but with market orders, so when prices touches key S/R or weekly pivot I'm waiting for some 1M formation to let me in [formation created by 25-60 1M bars, so I'm far from scalping]. Than my stops are around 30 - 50 pips, and moved to BE as soon as first target is reached [if you'd bother to watch my history you can easily see my SLs are barely hit.

Refering to R:R concept, I never listen to traders that set their target based on stops so they achieve 1:2 or any other fixed R:R, same with those that set their stops in some position simply because it's half of their target [or any other distance]. Personally I use key levels to set my SL and TP, and in case of bad R:R I give up all trade.

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