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Whats your best money management method?

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  • Post #1
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  • First Post: Edited Apr 28, 2020 3:19am Oct 20, 2019 10:04am | Edited Apr 28, 2020 3:19am
  •  Aar
  • Joined Nov 2015 | Status: Happy New Year | 516 Posts
Greetings.

As the thread title says, what's your best money management method? Try to describe as much as possible, image description would be amazing. I will link your post here in this first post, so whoever reading this it will be easy for them to find out from the first post.

Long term, short term, martingale, full margin trading, pyramiding, position developing, position averaging, grid management.....anything that you find is profitable for you please share. No matter if it is even the craziest idea, we would love to read it.

Mine as follows:

Well, i am not a full time trader. I am under 30 & in the quarter way in my career now. I trade small accounts to mainly get myself aquinted at the moment. For now i see this as a secondary source of income & backup for future.

I use few simple strategies to enter trades, which i developed from my past years experiences. IMHO the whole success depends on the risk management or more specificly money management in trading. Not only in trading but also in life, the better risk manager we are the better we are than others. I solely trade forex only, to be specific 7 USD major pairs. Because of spreads, volatility, liquidity etc. I allocate x% of capital at risk, which is combined of two trades primary & emergency backup. So my each trades consist of an emergency backup trade to cover up the loss if the primary trades hit the Stoploss. In plain English which is basically stop & reverse trade. Why i do this because when i did backtest my strategies i saw all the trades that hits Stoploss goes to a minimum certain amount of pips if they hit Stoploss. Not always but most time, so i utilize that opportunity to cover the loss. There are trades where both primary and emergency hits the Stoploss. But as this both trades risk are x% pre-determined, i lose only that x% risk. My RRR is aimed at more than 2.5 times the risk. Hitting that high RRR at high winrate is very difficult. For which, i take partial close of trades at different levels which is calculated based on percent of pips risked for that particular trade. Once a certain percent of pips in profit trade is BE+1 & take first partial profit. This way, i secure optimum profit from the trade. I aim for optimum profit not maximum. If i wait for trade to hit TP it will give me more than 2.5 RRR but if i bank profits at different levels i would be able to make one point something RRR if trade goes to full TP, since it is always uncertain whether trade will hit TP, its always best to bank as much profits possible from the trade IMHO. A pip profit taken or closed is a pip realized profit in your wallet, a floating equity does nothing but giving hope. Its not early closing a trade, its backtested to determine at which levels it will be optimum profit. Using small percentage of risk keeps DD small & reasonable. Most importantly keeps my mind calm & focused. Any particular trade is not important here but as a whole. The law of large numbers play always. I just have to follow the rule of engagement.

The first post will be continuously edited. Please show respect to fellow traders.

Ef5 method - Post 2
Macd-Rsi method - Post 5
DonPato method - Post 22
Eredribaen method - Post 31
Js3mwtRc method - Post 33
Oldtraderman method - Post 34
Jakub.pajer method - Post 35
FlavioEstev method - Post 36
LeoMarchegi method - Post 37

Best Regards.
How big can you think!
  • Post #2
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  • Oct 20, 2019 11:55pm Oct 20, 2019 11:55pm
  •  EF5
  • Joined Oct 2013 | Status: Member | 880 Posts
I manage my portfolio using a modified barbell strategy. A barbell strategy is structured so you put most of your portfolio in low-risk low return assets like t-bills and the rest in high-risk high return assets like crypto, options, levered ETFs, etc.

Attached Image


The big advantage to structuring a portfolio this way as opposed to a lot of medium-risk assets is you have roughly the same expected return without the tail risk. If 90% of your portfolio is in t-bills and 10% is in Ethereum then the worst you're going to do is lose 10% and you could potentially make a lot since Ethereum could more than double. If you invest a lot in medium risk assets like stocks and certain commodities you could end up with a big drawdown.

The way I've done this is a little dirty because I'm more mid-risk and high-risk because I need a higher expected return. I've bought a ton of VOO as my lower risk asset and ETFs like UPRO, SVXY, and options for my risky assets.
Self-sufficiency is the greatest of all wealth. - Epicurus
 
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  • Post #3
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  • Oct 21, 2019 12:08am Oct 21, 2019 12:08am
  •  Aar
  • Joined Nov 2015 | Status: Happy New Year | 516 Posts
Quoting Ef5
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I manage my portfolio using a modified barbell strategy. A barbell strategy is structured so you put most of your portfolio in low-risk low return assets like t-bills and the rest in high-risk high return assets like crypto, options, levered ETFs, etc. {image} The big advantage to structuring a portfolio this way as opposed to a lot of medium-risk assets is you have roughly the same expected return without the tail risk. If 90% of your portfolio is in t-bills and 10% is in Ethereum then the worst you're going to do is lose 10% and you could potentially...
Ignored

Pretty interesting way to manage portfolio. Thanks a lot for sharing. So you are long term trader. Holding positions in different assets for long time to maximize the profit combining low risk (major portion) & high risk (small portion) in your portfolio. Wishing you best of success.

Best Regards.
How big can you think!
 
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  • Post #4
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  • Oct 21, 2019 6:15pm Oct 21, 2019 6:15pm
  •  EF5
  • Joined Oct 2013 | Status: Member | 880 Posts
Quoting Aar
Disliked
{quote} Pretty interesting way to manage portfolio. Thanks a lot for sharing. So you are long term trader. Holding positions in different assets for long time to maximize the profit combining low risk (major portion) & high risk (small portion) in your portfolio. Wishing you best of success. Best Regards.
Ignored
Thanks Aar, this was a great idea for a thread! What kind of money management or portfolio strategies do you implement?
Self-sufficiency is the greatest of all wealth. - Epicurus
 
 
  • Post #5
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  • Oct 27, 2019 11:08pm Oct 27, 2019 11:08pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
First of all I got rid of all traditional ways like 2:1 ratio, that designed for people week in Math.
Secondly: I discovered that to manage the risk is to understand the "risk", and how the term is related to you. that men what is your x-- factor of tolerance/understanding mix.
my x=2, your x=1.87 and so on---each person has his own x.

so risk as a concept depends on "you" -- = on your x value
as a beginner your x should need exceed 0.1

different Xs, but we need a comprehensive unique formula that can be applied for all traders with their differences (each trader has different x)

x: is the "meaning of your risk"

unique formula should be something related to MarginLevel, which lead to what I Called "Margin Call Pips MCP"

the equation is:
I = (BALANCE-SOL*MARGIN)/(PipValue*Lots) ---- assuming all people are equal in their experiences

to include differentiating x:

I = (BALANCE-SOL*MARGIN)/(x*PipValue*Lots) ---- cos people are not equal, and will never be.
Be yourself
 
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  • Post #6
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  • Oct 27, 2019 11:12pm Oct 27, 2019 11:12pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
why rubbish like 2:1 prevailed through years in contexts, forums and essays, etc. ..?
Ans: because it is the simplest formula that a majority, who are normally very poor in math, can understand.
those when trying to jump to advanced understanding!! they can not! beyond their abilites.
Be yourself
 
 
  • Post #7
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  • Oct 28, 2019 2:26am Oct 28, 2019 2:26am
  •  LloydOz
  • | Membership Revoked | Joined Oct 2019 | 784 Posts
For those with excellent mathmatical prowess, a bloke by the name of Ralph Vince has a great deal to say about money management and how to optimize.

I personally take a bit here and there as is prudent, as the method he promotes most, optimal-f, is just scary. And you have to have a "strict" system (or systems) with plenty of observations.

I can't imagine a retail trader coming close to what is required.
 
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  • Post #8
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  • Oct 28, 2019 2:41am Oct 28, 2019 2:41am
  •  LloydOz
  • | Membership Revoked | Joined Oct 2019 | 784 Posts
Quoting Macd-rsi
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why rubbish like 2:1 prevailed through years in contexts, forums and essays, etc. ..? Ans: because it is the simplest formula that a majority, who are normally very poor in math, can understand. those when trying to jump to advanced understanding!! they can not! beyond their abilites.
Ignored
There are two, maybe three, unknowns in the equation.

1. I

2. Lots

3. x.

I haven't heard of balance-sol.
 
 
  • Post #9
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  • Oct 28, 2019 3:17am Oct 28, 2019 3:17am
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
Quote
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I haven't heard of balance-sol.
======
Attached Image
Be yourself
 
 
  • Post #10
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  • Oct 28, 2019 7:21pm Oct 28, 2019 7:21pm
  •  EF5
  • Joined Oct 2013 | Status: Member | 880 Posts
Quoting Macd-rsi
Disliked
First of all I got rid of all traditional ways like 2:1 ratio, that designed for people week in Math. Secondly: I discovered that to manage the risk is to understand the "risk", and how the term is related to you. that men what is your x-- factor of tolerance/understanding mix. my x=2, your x=1.87 and so on---each person has his own x. so risk as a concept depends on "you" -- = on your x value as a beginner your x should need exceed 0.1 different Xs, but we need a comprehensive unique formula that can be applied for all traders with their differences...
Ignored
I'm a little confused, could you show us an example?

Quoting Macd-rsi
Disliked
{quote} ====== {image}
Ignored
Live account? Not too shabby Macd-rsi.
Self-sufficiency is the greatest of all wealth. - Epicurus
 
 
  • Post #11
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  • Oct 28, 2019 10:22pm Oct 28, 2019 10:22pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
Quoting Ef5
Disliked
{quote} I'm a little confused, could you show us an example? {quote} Live account? Not too shabby Macd-rsi.
Ignored
you mean account in my signature?? "SWED" ??
if yes, every thing is explained in full detail in appropriate thread.

regarding risk-management equation, and any trader-x? it is simple and logical and anybody will accept it as the first option.
Quote
Disliked
could you show us an example?

Yes, I can.
step-by-step.

1- Ef5, for example, is a beginner with 3 months experience in forex market.
2- therefore Ef5-x = 17, for example
3 so he psychologically , can tolerate I equal to: (this I is the distance in pips b/w current prices and the price that you will receive the MarginCall)
I = (BALANCE-SOL*MARGIN)/(17*PipValue*Lots)
4- your account Balance now is 10,000 USD. Balance = 10,000
5- The Stop Out Level of your broker is 30% ----> SOL=0.30
6- your position was on EURUSD----> BBBDDD=EURUSD ------------------QQQDDD=USDUSD=1 ---- DDD is the account currency
7- The leverage on this pair with your broker is 400:1 --------- R=400
8-The 1-lot contract size of this pair EURUSD is 100,000 EUR. cz=100,000
9- pairs number of price digits after decimal point is 5. Dc=5

to be continued.
Be yourself
 
3
  • Post #12
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  • Oct 28, 2019 10:27pm Oct 28, 2019 10:27pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
BBB Base currency
QQQ Quote currency
DDD Dominating currency= account currency = usually USD.
Be yourself
 
2
  • Post #13
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  • Oct 28, 2019 10:39pm Oct 28, 2019 10:39pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
Attached Image (click to enlarge)
Click to Enlarge

Name: #37.png
Size: 36 KB


when margin level drop to 30% , we get the first MarginCall -some positions will be closed. this is the situation we should study to avoid using proper x-value---your x what is different from my x
Be yourself
 
1
  • Post #14
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  • Oct 28, 2019 10:56pm Oct 28, 2019 10:56pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
I = (BALANCE-SOL*MARGIN)/(17*PipValue*Lots)

==>

Lots= (BALANCE-SOL*MARGIN)/(17*PipValue*I)

but Margin also contains variable Lots

Margin for any pair is shown below: taken from here https://www.forexfactory.com/showthread.php?t=952861
Attached Image
Be yourself
 
 
  • Post #15
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  • Oct 28, 2019 11:05pm Oct 28, 2019 11:05pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts

Margin = cz/R*Lots*ZZZBBB*BBBDDD


and from prev. post:


Lots= (Balance-SOL*Margin)/(x*PipValue*I)



==>


Lots = (Balance-SOL*Margin)/(x*PipValue*I) = (Balance-SOL*cz/R*Lots*ZZZBBB*BBBDDD)/(x*PipValue*I)



Lots = (Balance-SOL*cz/R*Lots*ZZZBBB*BBBDDD )/(x*PipValue*I)


Lots (x*PipValue*I) = (Balance-SOL*cz/R*Lots*ZZZBBB*BBBDDD )


Lots (x*PipValue*I) + SOL*cz/R*Lots*ZZZBBB*BBBDDD = Balance



Lots [x*PipValue*I + SOL*cz/R*ZZZBBB*BBBDDD] = Balance


Lots = Balance / [ x*PipValue*I + SOL*cz/R*ZZZBBB*BBBDDD ]



if we select x higher, lots will be lower and vice versa, it depends on uour x.


hence: pipValue is QQQDDD itself. in case of EURUSD -- it is eqial = 1 -- every body know that pip value of 1 lot for EURUSD = USDUSD = 1


ZZZBBB = 1 for currencies. (not 1 for other instruments like indices and commodities etc . . )

BBBDDD = EURUSD for the case of your position on EURUSD.


To be continued.


Be yourself
 
 
  • Post #16
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  • Oct 28, 2019 11:10pm Oct 28, 2019 11:10pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
what is I?
I is a very smart variable related to pair speed or velocity.
Speed of EURUSD differs from GBPNZD speed.
Be yourself
 
 
  • Post #17
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  • Edited 11:53pm Oct 28, 2019 11:14pm | Edited 11:53pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts

please read first post #264 here, and few subsequent posts about any pair speed or ATR.

then you can design Lots that suit you: suit your experience, suit your phycology

https://www.forexfactory.com/showthr...9#post12572249



Attached Image




for currencies, especially EURUSD:

Lots = Balance / [ x*1*I + SOL*100,000/R*1*EURUSD]


Be yourself
 
1
  • Post #18
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  • Oct 28, 2019 11:44pm Oct 28, 2019 11:44pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
assume leverage R=100 not 400, for explanations:
unfortunately I don't find demo account with 400:1

Quote
Disliked
7- The leverage on this pair with your broker is 400:1 --------- R=400
Attached Image (click to enlarge)
Click to Enlarge

Name: #37.png
Size: 31 KB
Be yourself
 
 
  • Post #19
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  • Oct 28, 2019 11:52pm Oct 28, 2019 11:52pm
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
I at minimum (for very experience trader who take risky positions is the pair speed at MODU=1)

for EURUSD I = 100*EURUSD = 100*1.10981 * 10^Do=110.981 * 10^1 = 1109.81 pipette


Lots = Balance / [ x*1*I + SOL*100,000/R*1*EURUSD]
= [ 10,000 ] / [ 17*1109.81 + 0.30*100,000/100*1.10981 ] = ???
Be yourself
 
 
  • Post #20
  • Quote
  • Oct 29, 2019 1:08am Oct 29, 2019 1:08am
  •  Macd-rsi
  • Joined Oct 2019 | Status: Forexian Fighter = FF | 11,357 Posts
Quote
Disliked
= [ 10,000 ] / [ 17*1109.81 + 0.30*100,000/100*1.10981 ] = ???
= 0.52 Lots.
in this way MCP will be after x*I = 18867 pipette = 1886.7 pips

do you as a beginner feel comfortable (almost 0% risk) with 0.52 lot /10,000 USD ???

x is your degree of conformity.
here we never speak about traditional SL --
Be yourself
 
 
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