Capital management. Multiple lots method

This article will focus on the multiple lots method. We will consider its strengths and weaknesses. But first, it is worth recalling the main methods of money management, which can be divided into seven big directions:

Lack of capital management.
2. Multiple Lot Method.
3. fixed amount at risk method.
4. Fixed interest method of capital.
5. The method of matching wins and losses in trading.
6. Method based on the intersection of moving averages on the capital curve.
7. The method of optimal F.

Multiple lot method

Originally by. multiple lot method emerged on stock markets and a little later on commodity markets. As the name implies, it is not trading with a single lot, i.e. a contract or a package of shares, but with several lots. There are two varieties of this method:
— Торговля многократными лотами по одному сигналу.
— Торговля многократными лотами по мере роста прибыли.

The first type of method is trading multiple or "multiple" lots at the same time on the same trading signal. That is, the entire number of lots is purchased (sold) as soon as the decision is made to start trading. This is essentially the same method standard (fixed) lotbut with a larger open position size.

The bottom line is that while this method can be effective in increasing trading profitability, it is often a not the most effective way of controlling the size of the risk.

The second type of method represents buying more and more contracts or shareholdings when growth is increasing and selling part of positions when growth stops. The essence is that the position increases when profit increases or the market moves in your direction, and decreases when profit decreases or the market stops moving in the desired direction. This variation allows you to slightly reduce losses by reducing profits. At the same time, the linearity of both categories is generally preserved.

At FOREX market this method is presented in the form of adding and reducing positions. This is due to the fact that the result of the transaction, whether profit or loss, is fixed on the trading account only after the transaction is fully closed (see Fig. 1).

The method itself is strongly tied to the trading strategy of each particular trader and can be quite effective in maintaining positions. It is only necessary to always clearly follow the trading strategy of adding or reducing a position (see Fig. 2).