Money Management

  • The lifetime of any position on the foreign exchange market consists of three stages: opening a trade, accompanying it, and closing it. All trading strategies give a comprehensive answer to the question of when to open and when to close a trade. The question of tracking an open position in the vast majority of strategies is practically not disclosed, although it can increase profits by 200% or more. At the moment, there are three most common ways to accompany an open trade. Method #1: Stop-loss and Take-profit The rules of classical trading on the currency market imply installation of two orders that will close the open trade without any participation of a trader: stop-loss will close the trade with a loss, take-profit will close it with a profit. The first way of accompaniment is built on...

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  • Trading on the currency market is so widespread nowadays that everybody, who has 10 dollars in his pocket, can feel himself a trader. Brokers thoroughly support this concept by widely advertising the idea that minimum funds are necessary for trading. The Internet is full of blogs telling about how at Forex market it is possible to turn a couple dozens of dollars into almost millions profits. Does it mean that the size of the deposit does not matter? After all, what is the sense of investing thousands of dollars in trading, if you can manage with a sum many times less? Today we're going to try to figure out a very controversial question, whether the size of the deposit affects the profitability of trading....

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  • Let's ask several traders how much they earned in a month on the foreign exchange market. One will answer that his monthly profit was 1000 dollars, the second - 700, and the third - 500. From this it can be concluded that the first trader is the most effective. But this way of estimation is far from professionalism and is one-sided. So how can we evaluate the success of our trading? Here the trader gets help with the R-coefficient. Let us start with the typical situation: there are two traders trading on the foreign exchange market. Each of the traders has closed a profitable trade with the profit of 100 points. It would seem that trades are equal, but for understanding it is necessary...

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  • Money management is one of the cornerstones of trading on , and without following its rules, profitable trading is simply not possible. Whatever your trading strategy, your profits will depend on how you manage your trades and limit your risks. There are dozens of money management models, but the approaches to trade support can be roughly divided into two major groups: limiting losses and loss waiting tactics. Everything is clear with the limiting loss tactics: when opening a deal a stop-loss order is placed which closes it with a fixed loss if the price moves in the opposite direction to the one predicted. Overshooting losses is...

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  • Let's continue the topic of hedging opportunities on , which we began in issue 89 of ForTrader.org. Hedging on: illusory and hidden opportunities" Hedging on: illusory and hidden opportunities. Part 1 How to use hedging on gaps? This strategy represents one more purely technical method of hedging on gaps, which also does not require any "sense of the market" or "magic" indicator, so it can be used by beginner traders. This strategy assumes the use of the Metatrader platform, but with some changes can also be used on other trading platforms. If you look closely at the contract specifications of different brokers, you can notice that the closing on the...

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  • In this article we want to tell you how inexperienced traders' addiction to such method as hedging on , reduces their income, as well as show you how simple strategies that do not require either "market sense" or "magic" indicators, can bring steady income. Hedging at: basic principles What is hedging at? It's the opening of a counter position. Let's consider this concept using an example. Suppose you already have a market order to buy, or in other words, you have already opened a long position. For some reason, it may seem to you that the order has already run out of money, but instead of closing it, you can open a...

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  • Many Forex traders use the Martingale principle in their work. Even more market participants have heard about it. We will not talk about the advantages and disadvantages of this method. Instead, we will note that it made it possible to develop a money management system called "Anti-Martingale". The Anti-Martingale Money Management System differs from the classical Martingale system which means increasing the position volume while receiving losses, the Anti-Martingale Money Management System is based on the principle of increasing the volume of profitable and reducing the volume of loss-making positions. The standard scheme of Anti-Martingale implies doubling the volume of profitable position, but the number of increases can be arbitrary. Anti-Martingale Money Management System...

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  • Money Management (MM) - is a complex of measures, which implies multiplication of investments and other investments. Money management is an effective money management that minimizes risks when trading on the foreign exchange market. Without complying with the MM rules any trading is doomed to failure sooner or later. Unfortunately, violating the rules of efficient money management is the most common mistake first-time traders make, leading to disastrous results. Certainly, it is personal trader's choice to follow MM rules or not. Almost all traders know examples when a position opened with the whole deposit has successfully increased the initial deposit several times. It is possible. Several times. After that it is inevitably followed by...

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  • While speculating in the market, the trader can fall into prostration, which is very dangerous for his purse. This happens mainly in two cases. "The first case: the speculator entered the market with a very large lot. This method of trading is called "piggybacking". This method can quickly make a large sum of money, of course, you can lose no less. Here is how it happens. The trader is looking for an entry point. When a suitable situation arises, he acts instantly. If the trader enters with an exorbitant lot, he is absolutely wrong. The chart moves very erratically in the short term. You can ask any professional trader about this, he will confirm it. Pale in the face of a large...

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  • Almost everyone who starts his career on the foreign exchange market has a small initial capital. We suggest you consider a trading method that will give you the opportunity to increase your capital by several times in a fairly short period of time. This method is called "deposit acceleration". It is a high-risk method, so it is worth considering whether or not it is appropriate for you. Rules of Accelerating the Deposit If your goal is to accelerate your deposit as fast as possible, then you need to trade on the basis of scalping strategy, or scalping, using the leverage of 1:500. An example is the deposit size of one hundred U.S. dollars and the most popular currency pair on the market - EUR / USD. Under such conditions...

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  • The dangerous Martingale money management method came to the world-famous "Foreign Exchange" with the light hand of gamblers. Some traders, especially beginners, perceive the method as a trading strategy and consider martingale as the only way to achieve 100% profit. Experienced professionals are cautious with the martingale tactics because it is not only profit that awaits the trader at the end of the journey, but also a very probable loss of the deposit. What is Martingale? The main argument "for" the martingale principle in the market is a well-known fact: the martingale tactic, which has been successfully used in gambling (poker, roulette) for two centuries, caused the appearance of minimum and maximum bets and two green fields: "0", "00". Thus, the casino owners...

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  • One of the basic rules of -trading is to keep losses to a minimum. With small losses in -trading, you can survive times when the market is moving against you and hold on to a good position when the trend reverses. How much can you lose painlessly? A proven method of keeping losses small is to set a maximal loss before you open a trading position on e. The maximal loss is the largest amount of capital, the loss of which will not throw you out of the rut, will be acceptable for one trade. With a maximum loss set at a small percentage of your trading capital, a series of losses will not stop your trading activity. Unlike 95% -traders in the market who...

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  • Undoubtedly, the market provides a unique opportunity to make money with your knowledge. There is a high probability of success (with a competent choice of trading strategy), but there is no less probability of loss of invested funds. The situation on the financial market sometimes changes lightning fast, when in an instant a rapid rise turns into an equally rapid fall. It would seem that he does not distinguish the personalities of market participants, and he is absolutely indifferent to the fate of any of them. You won - fine, bargained - your problems. Bidding on the market will in any case continue with you or without you. At the same time, strange as it may seem, there are a lot of "safety" that will not let the trader to lose "to nothing". Insurance against "plummeting" In...

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  • The exercise of prudent money management encompasses many methods and skills, intertwined with the trader's reasoning. Failure to manage money wisely exposes the trader to the deadly risk of collapse, ultimately leading to the likely loss of assets. Whenever I hear of a trader making huge profits in the market while trading in a relatively small or average trading account, I know that this trader is most likely not following sound Money Management rules. In this case, the trader has probably put his account at excessive risk due to abnormally high trade sizes. In this case, the trader (or a more appropriate definition for him would be "player") may have been fortunate previously, leading him to...

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  • For example, Trader 1 has 75% of all positive trades and Trader 2 has only 40% of all profitable trades. Which trader is more successful? Of course, we cannot answer this question, because we do not know how much each trader earns on all profitable trades, and how much they lose on all unprofitable ones. Therefore the percentage (quantity) of profitable trades is not the most important factor of success in trading. Of course, each of us wants the majority of our trades to be profitable, but if we want to achieve real success in trading, we need to consider a different ratio. This ratio is called "risk/profit" and this ratio is one of the most important aspects in money management,...

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  • In this article we will continue the description of different methods of risk management, based on dynamic trailing stop. TrallingStop by Daily Highs/Lows To maximize profits a trader needs to stay in a trend movement as long as possible. If you take the definition of a trend - a purposeful price movement in which each subsequent low or trough is higher than the previous one, it is necessary to have a fixation level of losses just at these lows. Thus the profit will grow until the subsequent minimum will not be lower than the previous one and the trend will not change. This stop has the following logic of movement - the level of fixation of losses is exposed on the maximums or minimums of prices for a certain number of days (2-4). В...

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  • We all know that you have to manage risk. If you're going to buy a stock, futures, or something else, and you know what level you're going to exit at, then you know how to calculate the optimal number of lots in a trade, especially since I'll show you some examples and simple formulas for managing risk in the stock market. The 2 Percent Rule There is a rule of thumb that tells us that we should not risk more than 2% of capital in every trade. I don't even know where I haven't seen this rule: it's everywhere. And I agree that knowing your risk in advance makes it easier to stick to the deal. That's where the first formula was born. The maximum loss in a trade is equal to the product of the risk...

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  • Risk is all around us. We are constantly risking something - our lives, relationships with our loved ones, money... But if previously it was possible to escape from this in the virtual world, now we are surrounded by danger even there. Many people are now making money on the Internet. These are electronic exchange players, freelancers, copywriters and many others. Most of all, of course, you can earn from currency trading. This is the most profitable, but also perhaps the most risky environment, because working as a freelancer, for example, no investment is required. In order to earn more and safer you need to carry out risk management. In this case, the risk of losing your own capital is close to zero. The main thing is to have the right system and not to forget...

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  • The Money Management tips below are focused on medium-term trading, which I am a follower of. They are not axiomatic and will differ significantly for other types of trading (especially for intraday trading). However, these are the basic points that I use and which do not let me down. 1. Always use limit and stop orders, or place locking pending orders. 2. Setting stop orders and take-profits, take into account: the profit/loss ratio must be statistically justified - if TP is twice less than SL, then there must be at least twice as many winning trades. 3. Location of stop orders should not be closer than 40-50 pips relative to the entry point. The orders, which are located closer...

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  • Risk is all around us. We are constantly risking something - our lives, relationships with our loved ones, money... But if previously it was possible to escape from this in the virtual world, now we are surrounded by danger even there. Many people now earn on the Internet. These are electronic exchange traders, freelancers, copywriters and many others. Most of all, of course, you can earn from currency trading. This is the most profitable, but also perhaps the riskiest environment, because working as a freelancer, for example, no investment is required. Manage your risk in order to earn more and safer, you need to implement risk management. In this case the risk of losing your own capital is close to zero. The main thing is to make a correct trading...

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