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Whats your best money management method?

  • #21
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  • Oct 29, 2019 4:26am Oct 29, 2019 4:26am
Well all of that is a good rule of thumb. Thankyou.
  • #22
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  • Oct 29, 2019 10:40am Oct 29, 2019 10:40am
I'm sure this response will seem very UNsexy. I have no complicated formulas or math equations just simple logic that utilizes the following principles:

  1. Profitable trades must be reasonable and repeatable: Taking a profitable trade is no magic trick. Even a stopped clock is correct twice every day. Repeating the profitability over and over again is the "trick". I therefore keep my take profit at reasonable and repeatable points along the order flow
  2. By producing more winning trades than losing trades (because your trades are consistently profitable) the occasional loss is to be expected. Thus each the risk exposure to each trade must be at most 1/2 the profit potential. If my entry point cannot reasonably provide that (excluding some unforeseen event) I will wait or not take the trade at all.
  3. Stops on trades ALWAYS go beyond the last point where the order flow dominance showed itself. Many call these "swing points" and the distance to that point (in pips, points, or cents) is what determines the contract size, never to expose more than 2% of capital to risk.
  4. If a profitable trade has advanced to a point where price movement becomes indeterminate (a stall in price) and you are asking yourself if you should just take the small profit or tighten your stop in HOPE of further advancement...take your profit and be done. One never goes broke taking profits.

    1. Side note...if price does continue after you closed...SO WHAT!!! you were still profitable!! Stop whining and be thankful for yet another statistical win.



These principles (if you stick to them) are simple, effective, and easy to execute in real time without the aid of a calculator or some whiz-bang computer program, or "gee whiz, look at that..." indicator. Keep it simple and you will be (stay) profitable.

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  • #23
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  • Oct 30, 2019 4:35pm Oct 30, 2019 4:35pm
Quoting DonPato
Stops on trades ALWAYS go beyond the last point where the order flow dominance showed itself. Many call these "swing points" and the distance to that point (in pips, points, or cents) is what determines the contract size, never to expose more than 2% of capital to risk.
Good advice and something I intend to start following a bit more diligently (expecially adjusting the contract / order size). I have gotten burned way too often by not capping my loss risk.
If in doubt, paddle out!
  • #24
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  • Oct 30, 2019 5:04pm Oct 30, 2019 5:04pm
Quoting SurfsUp
... I have gotten burned way too often by not capping my loss risk.
I too have done this to myself even though I know it won't work. Such a simple thing yet my own personal averice interferes. Thus I demand of myself strict adherence to these principles and Viola!! Consistent winning behavior.
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  • #25
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  • Oct 30, 2019 5:42pm Oct 30, 2019 5:42pm
Quoting Macd-rsi
{quote} 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} 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)...
Thanks a lot Macd-rsi! That's a very interesting approach towards risk management and very different from what I'm used to.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #26
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  • Oct 30, 2019 5:44pm Oct 30, 2019 5:44pm
Quoting DonPato
I'm sure this response will seem very UNsexy. I have no complicated formulas or math equations just simple logic that utilizes the following principles: Profitable trades must be reasonable and repeatable: Taking a profitable trade is no magic trick. Even a stopped clock is correct twice every day. Repeating the profitability over and over again is the "trick". I therefore keep my take profit at reasonable and repeatable points along the order flow By producing more winning trades than losing trades (because your trades are consistently profitable)...
That's some solid advice Don!
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #27
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  • Oct 30, 2019 10:17pm Oct 30, 2019 10:17pm
Quoting DonPato
I'm sure this response will seem very UNsexy. I have no complicated formulas or math equations just simple logic that utilizes the following principles: Profitable trades must be reasonable and repeatable: Taking a profitable trade is no magic trick. Even a stopped clock is correct twice every day. Repeating the profitability over and over again is the "trick". I therefore keep my take profit at reasonable and repeatable points along the order flow By producing more winning trades than losing trades (because your trades are consistently profitable)...
your post does not include "lot-design" which is the core of money management??
how to choose the proper lots? on which basis?
Be yourself
  • #28
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  • Oct 30, 2019 10:37pm Oct 30, 2019 10:37pm
Quoting Macd-rsi
{quote} your post does not include "lot-design" which is the core of money management?? how to choose the proper lots? on which basis?
If by "lot design" you mean volume? It is very simple. I am a USD trader so all lots are USD based. Each mini lot pip is worth $1. So if I have a stop of 50 pips... that's a $50 stop. So I'm looking for a take profit of $150-$300 (pips). It is extremely rare that I use more than a single mini lot as my FX trading is meant for a better return on my savings and not as income. Thus a single successful trade can render 3% or more. I keep this account balance at an easy to calculate $10,000 each year and any additional profits are syphoned off for other wealth building activities.

I do not recommend using FX trading for income, although I know a few people who do just that. I feel your playing field is more"level" in a more transparent market like futures.
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  • #29
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  • Oct 30, 2019 10:45pm Oct 30, 2019 10:45pm
Quoting DonPato
{quote} If by "lot design" you mean volume? It is very simple. I am a USD trader so all lots are USD based. Each mini lot pip is worth $1. So if I have a stop of 50 pips... that's a $50 stop. So I'm looking for a take profit of $150-$300 (pips). It is extremely rare that I use more than a single mini lot as my FX trading is meant for a better return on my savings and not as income. Thus a single successful trade can render 3% or more. I keep this account balance at an easy to calculate $10,000 each year and any additional profits are syphoned off...
will explain my question more:

assume you have 1,000 USD
You want to enter EURUSD Buy,
what is the size (=lots=volumes) of you position?
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Be yourself
  • #30
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  • Oct 30, 2019 11:00pm Oct 30, 2019 11:00pm
Quoting Macd-rsi
will explain my question more: assume you have 1,000 USD You want to enter EURUSD Buy, what is the size (=lots=volumes) of you position? {image}
Since we are taking about 1/10 of my "normal" trading equity then I will be forced to say that 1/10 of the position as well. This would mean a micro lot (0.10/pip) not to exceed $20...in other words if my stop must be 200 pips I'll pass on the trade. This is a rare thing at any rate as I would not consider such a small equity unless there was no other choice. Under capitalization requires even more patience to create the profit margin we are all seeking. Impatience leads to over trading which in turn creates greater probability of loss...
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  • #31
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  • Jan 5, 2020 10:40am Jan 5, 2020 10:40am
In fact, my main rule is not to risk large amounts of my fixed capital, i.e. I do not apply them to one asset. In my opinion, it is much more effective to allocate the same 10% of capital to 3 or 4 assets and then to observe the situation and then either buy or drop a position. To be honest, sometimes I get a feeling of disappointment if I see that I have invested too little in a strong and profitable position. But on the other hand, it is my safety and the safety of my money. And it's much more important to me than a moment's sadness. Still, as practice has shown, the market does not like fuss and these impressions are deceptive. That is why at such moments I try to switch to something else at once and do not allow myself to rest on my laurels.
  • #32
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  • Jan 5, 2020 11:23am Jan 5, 2020 11:23am
https://www.babypips.com/tools/position-size-calculator
Price will always go in the direction that causes the most amount of pain.
  • #33
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  • Jan 5, 2020 11:41am Jan 5, 2020 11:41am
My money management method is risking less than risking more and it is not always the same. Some times it uses a reward of 4 to 1 and others 25 to 1, but never the same. I haven't managed yet to make 1:2 or 1:3 in all my trades this kind of money management is just a context for the new traders who can take it as an example.

Also you may hear, or read, "never put your eggs in one basket" but I know that by watching too many baskets you may break more eggs, because you can't watch all the baskets the same time with the same attention.
Looking for profitable short term trades ...|
  • #34
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  • Edited Jan 6, 2020 2:39am Jan 5, 2020 12:49pm | Edited Jan 6, 2020 2:39am
Quoting Aar
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. The first post...
Hi,
Great thread, good money management is more important in determining long term profitability than most other trading parameters. I look upon MM as a key plank of risk control, and risk control is my #1 priority in trading.

How you structure your MM depends on how you trade. I day trade a single market only and in this context my MM is:
- only one trade open at a time
- all trades have a hard stop that is always respected
- trades are sized so that each trade risks 1% of the account at the stop
- move the stop up appropriately as the trade progresses favourably
- never average down or pyramid up a position

These are simple rules and will keep you out of any real trouble. If you are comfortable with higher drawdowns and a more jagged equity curve you could risk more than 1% per trade but going beyond 5% is asking for trouble. Most blown accounts are blown not out of 'death from a thousand cuts' of loads of small losses, but from huge individual losses which can only occur if MM and risk control is poor.

If you trade multiple markets you need to incorporate in your MM some sort of volatility balancing between markets.
If you have more than one trade open at a time you need to consider the trade correlations in your MM so you can estimate your overall exposure.
If you want to average down or pyramid up, you need to consider in your MM the resultant risk exposure of doing so and make sure it stays within prudent limits
  • #35
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  • Jan 5, 2020 2:56pm Jan 5, 2020 2:56pm
Hey guys,
I trade always calculating what loss in case it goes against me is acceptable. By doing these easy numbers I found out I'm willing to risk 1% of account per trade.

Philosophy here is pretty transparent - small gains or small losses, but I will stay in the game and see the other day.
  • #36
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  • Jan 10, 2020 6:46am Jan 10, 2020 6:46am
I stick to the most liquid currency pairs, the low spreads help me to better manage my trade.
Also, I always have a realistic goal, be it daily, weekly or monthly, it helps me emotionally.
I do not trade with high amounts, my lot sizes are mostly micro lots.
This strategy is very basic and personally for me it works really well.
We're all different in every aspect and it is important for everyone to find something that suits themselves, every trader can customize their own money management strategy.
  • #37
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  • Jan 20, 2020 5:57am Jan 20, 2020 5:57am
I keep a trading journal. Keeping a trading journal helps me identify my weak spots of money management and identify patterns that lead to lost money.
For example I see if the stop-losses are too tight or take-profits too far away, reward-to-risk ratios inappropriate or risk per trades too large.
I then adjust my money management techniques and become more successful in the future. Learning on your own mistakes is the best.
  • #38
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  • Apr 19, 2020 3:02am Apr 19, 2020 3:02am
Wow, so many traders shared their method while the OP himself went AWOL! Sorry

I will update post one shortly with everyones MMM along my method as well. Thanks everyone for sharing. Much appreciated. Because sharing is caring, you never know your post might inspire someone to take control of their trading appropriately.

Best Regards.
How big can you think!
  • #39
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  • Apr 19, 2020 3:44am Apr 19, 2020 3:44am
Quoting EF5
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...
Perfect and what is monthly or yearly return of this strategy according to your experience?
  • #40
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  • Apr 20, 2020 2:48am Apr 20, 2020 2:48am
Hello,
Earning money is very tough, so for this i need to management my money with best place and best methods. I follow some tips for managing my money..

1. Have a budget.
2. Using my budget.
3. I fixed a limit for unbudgeted spending.
4. I just track my spending.
5. I don't commit to any new recurring monthly bills.
6. I just make sure that, i paying the best prices.
7. I save up for big purchases.
8. I limit my credit card purchases.
9. Contribute my saving regularly.
10. And i just taking practice being good with my money.

So, i just follow this tips. Its helps me for managing my money with best place.

Thank you..
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