Money Management

mr.traderNovember 1, 2019

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Basic rules of money management on - Money Management

Intending to work on financial markets, one should be aware of the fact that, first of all, it is necessary to develop an effective program of capital allocation. The systematic management of capital at work at the markets with margin trading guarantees to the trader a safe existence. The equal ratio between the amount of profit and the amount of loss on the average transaction should be strictly observed. In this case, the trader does not play, but works with his investments. Considering the money management, let us get acquainted with the main points of this process. The main tenets of Money Management - Obligatory reserve required in unusual situations is at least half of the invested capital. This is the first rule of determining the margin for open positions. This is the advice.

mr.traderOctober 28, 2019

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How to reduce risks through diversification on ?

When creating trading strategies, traders often chase the maximum profitability of the system. However, it is more important not to increase the value of expected profitability, but to reduce the possible risk, which is expressed in the maximum allowable drawdown. A simple, but relatively reliable method of strategy efficiency estimation is to define the ratio of profitability to the maximal drawdown of the system during the examined period, the so called recovery factor. For example, if the system yield is 45% p.a. and the maximal drawdown is 15%, the recovery factor will be 3. If you compare two systems with different values of returns and drawdowns, the system with the higher recovery factor will be better. A system giving 30% annualized returns with a 5% drawdown would be...

mr.traderSeptember 4, 2019

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When does risk become profitable?

"Our whole life is a game," a clever man once said, and he was quite right. All of life's actions are based, in one way or another, on the rigid rules that make us civilized human beings. And like any game, there are losers, winners, and those who are still playing, who have a great desire for winning status. Unfortunately, not everyone succeeds, because every step we take in the battle for leadership involves a certain amount of risk. Surely, each of you has heard stories in your life of ridiculous cases that have had unfortunate consequences. Like, for example, the survivor of a terrible car accident who flew out into...

mr.traderJuly 11, 2018

0 978

Diversification in the market

Diversification - (from Latin diversus - different + facere - to do) - a change in the range of products and reorientation of markets. Diversification in the field of investments implies a variety of investment assets so that potential losses from one instrument could be compensated by another. As a rule, a diversified portfolio is divided into two parts - risky assets with high returns and high risks and risk-free or low-risk assets. Due to ignorance, people often confuse diversification with so-called naive diversification - a method of forming a portfolio, which includes various instruments with different risks without any connection with risks and returns. Beginning investors think...