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Last Post: 6/11/2011 8:17:05 AM - Followers: 7 - Board type: Free - Posts Today: 0

Welcome to Currency Chat - The lounge for the bored or chatty Forex trader.  Posts of any kind, including off-topic, will be allowed here, with particular emphasis on money management, and the psychology of trading.  In short, when you blow out your account and need to vent, we're listening!

MONEY MANAGEMENT

OK, so we are obviously all trading to make money besides the comraderie and adrenaline that goes with it....so how do we get from point A to point B?  Well - that is simple - you learn how to make winning trades and employ good money management skills.  For the winning trades, I highly recommend you visit these sister sites for the best assistance on everything from technicals to full trading systems. 

http://investorshub.advfn.com/boards/board.aspx?board_id=5392

http://investorshub.advfn.com/boards/board.aspx?board_id=5125

For the money management, I hope you will review some of these examples and see that compounding small gains is the key.

$1000 Capital with 1% Compounding Gains
Trades Starting Capital Ending Capital
1-50 1000.00 1628.35
51-100 1644.63 2678.03
101-150 2704.81 4404.38
151-200 4448.42 7243.58
201-250 7316.02 11913.03
251-300 12032.16 19592.54
301-350 19788.47 32222.52
351-400 32544.74 52994.18
401-450 53524.12 87155.91
451-500 88027.47 143339.38
501-550 144772.77 235740.50
551-600 238097.91 387706.33
601-650 391583.40 637634.17
651-700 644010.52 1048673.45

Now, I'm sure some of you are saying, "yeah that is 700 days or 700 trades", but how many people realize the power of that little 1%, and instead aim for the fences?  To illustrate another money management methodology from a wise young trader, strongtower, you can also establish a "per pip" goal.

$1000 Capital with 25 Pip Gain (**assumes 20 trading days per month**)
Month Amount of Trade Dollars Per Pip Daily Gain Ending Balance
January 10K 1 25 1500
February 10K 1 25 2000
March 30K 3 75 3500
April 30K 3 75 5000
May 60K 6 150 8000
June 60K 6 150 11000
July 80K 8 200 15000
August 80K 8 200 19000
September 100K 10 250 24000
October 100K 10 250 29000
November 150K 15 375 36500
December 150K 15 375 44000
January-??? 200K 20 400 52000

Now, for those of you experienced in Forex, you will probably notice that mid-year in the above chart, you have plenty of capital to be trading with more risk.  That is something to decide from your own comfort level, but you can see clearly that a small amount of units with a consistent daily net of 25 pips will earn you a nice income!  Notice I said net....if you think for one moment that you will never have losses, you should go back to your demo account immediately and start over.  The important point is NET.  You may also have a down day and have to "make it up" another....still, you get the point of the illustration.  CONSISTENCY IS KEY!

Our next example is far riskier, but when you look at the results, you will be tempted....this is NOT for the faint of heart, nor should you attempt this unless you have a very high percentage of winners first.  Credit goes to Ataglance2 and Daiello for the idea - thanks for the input!

$1000 Capital, 50% "Win" Ratio, S/L of 20 Pips, T/P of 50 Pips (**with 100:1 Leverage**)
Trade Number Starting Balance Traded Units Margin Required Gain/Loss Ending Balance
1 1000.00 30K 300.00 -60.00 940.00
2 940.00 25K 250.00 125.00 1065.00
3 1065.00 30K 300.00 -60.00 1005.00
4 1005.00 30K 300.00 150.00 1155.00
5 1155.00 35K 350.00 -70.00 1085.00
6 1085.00 35K 350.00 175.00 1260.00
7 1260.00 40K 400.00 -80.00 1180.00
8 1180.00 40K 400.00 200.00 1380.00
9 1380.00 40K 400.00 -80.00 1300.00
10 1300.00 40K 400.00 200.00 1500.00
11 1500.00 45K 450.00 -90.00 1410.00
12 1410.00 45K 450.00 225.00 1635.00
13 1635.00 50K 500.00 -100.00 1535.00
14 1535.00 50K 500.00 250.00 1785.00
15 1785.00 55K 550.00 -110.00 1675.00
16 1675.00 55K 550.00 275.00 1950.00
17 1950.00 60K 600.00 -120.00 1830.00
18 1830.00 60K 600.00 300.00 2130.00
19 2130.00 65K 650.00 -130.00 2000.00
20 2000.00 65K 650.00 325.00 2325.00
21 2325.00 70K 700.00 -140.00 2185.00
22 2185.00 70K 700.00 350.00 2535.00
23 2535.00 75K 750.00 -150.00 2385.00
24 2385.00 75K 750.00 375.00 2760.00
25 2760 80K 800.00 400.00 3160.00

Now, the system above does have a couple of additional rules, if you will.  The author recommended starting with 5K, and using the same calculations over 20 trades would net you around 38K.  Since so many people reading this board are trying to start with smaller numbers, I used 1K if for no other reason than to show good money management is CRUCIAL!  You can be wrong 50% of the time and still come out with a 200% return (if you have one additional trade for 50 pips go your way over the 50% win ratio).  But you MUST limit your losses and be sure they are significantly less pips than your gains.

More to come....

 

 

PostSubject
#211   GM Wheeler34...you might try this link to the simplegreen 06/11/11 08:17:05 AM
#210   I am looking for someone who can give Wheeler34 06/10/11 10:29:27 PM
#209   What do you guys think of Eur/Usd NeoCool 10/10/10 08:06:10 AM
#208   Indeed...good evening boys! SherriT 05/18/09 09:50:57 PM
#207   Very nice trade villas! gitonwithit 05/18/09 09:46:26 PM
#206   With respect to my last post I would villas 05/18/09 07:40:36 PM
#205   For Sherri and anyone interested. villas 05/18/09 07:17:05 PM
#204   I will try to find it on another strongtower 05/15/09 02:43:14 PM
#203   The reason you couldn't see it, git, is SherriT 05/15/09 09:56:21 AM
#202   I just looked, their all in ex form strongtower 05/15/09 08:02:14 AM
#201   ok never knew that. will see if I strongtower 05/15/09 07:59:37 AM
#200   In order to make an EA from it, gitonwithit 05/15/09 07:58:09 AM
#199   try using one of these files. their put strongtower 05/15/09 07:49:39 AM
#198   no I could only find it in ex strongtower 05/15/09 07:40:58 AM
#197   ST I can't get it to show on gitonwithit 05/15/09 07:32:47 AM
#196   actualy doing a lot of research on this strongtower 05/15/09 06:56:05 AM
#195   ROFLMAO - I was thinking about stuff like SherriT 05/14/09 09:40:35 PM
#194   Can ya believe I just had to Google gitonwithit 05/14/09 08:29:43 PM
#193   You were right, though, the curvature is definately SherriT 05/14/09 06:54:37 PM
#192   I am running the current version on a SherriT 05/14/09 06:41:39 PM
#191   I am not being that precise with it....I SherriT 05/14/09 06:06:49 PM
#190   I'd settle for a hammock by a pool SherriT 05/14/09 06:04:26 PM
#189   BTW, one of the tangents I got off gitonwithit 05/14/09 06:03:10 PM
#188   Pattern + Repeating = Longnecks in a hammock gitonwithit 05/14/09 05:54:49 PM
#187   I see what you are saying...I have basically SherriT 05/14/09 05:46:42 PM
#186   It changes and may not be a true gitonwithit 05/14/09 05:39:51 PM
#185   When you say it is a repainter, what SherriT 05/14/09 05:30:10 PM
#184   ST, I'm pretty sure that the COG bands gitonwithit 05/14/09 05:27:00 PM
#183   Just to my template....if you remember when we SherriT 05/14/09 05:24:05 PM
#182   added to which EA strongtower 05/14/09 05:17:39 PM
#181   np, if an ea were made this is strongtower 05/14/09 05:16:57 PM
#180   actualy studying this more and more I really strongtower 05/14/09 05:16:18 PM
#179   Hence the overflow....OK, so that was my problem SherriT 05/14/09 05:07:06 PM
#178   If it's the one I sent you the gitonwithit 05/14/09 05:04:38 PM
#177   Try using the IFT file and see if SherriT 05/14/09 04:56:18 PM
#176   Well that helps a ton....didn't understand how that SherriT 05/14/09 04:42:50 PM
#175   I can't get it to show when I gitonwithit 05/14/09 04:28:31 PM
#174   The only problem with that, like in the SherriT 05/14/09 04:06:06 PM
#173   Yeah, I find it easier to stick with gitonwithit 05/14/09 04:00:46 PM
#172   OK, well I added the IFT and COG SherriT 05/14/09 03:41:27 PM
#171   Hey thanks ST! gitonwithit 05/14/09 02:34:59 PM
#170   That would be great Sherri! gitonwithit 05/14/09 02:32:36 PM
#169   Or that works too - LOL SherriT 05/14/09 02:24:51 PM
#168   cog file strongtower 05/14/09 02:14:36 PM
#167   I can forward the files to you via SherriT 05/14/09 02:12:18 PM
#166   ST which COG and SDC indies are you using? gitonwithit 05/14/09 01:32:54 PM
#165   well I was just being nice lolol gett'er strongtower 05/14/09 12:12:37 PM
#164   You guys are more patient than I am...I SherriT 05/14/09 12:11:04 PM
#163   well we are patient, you do your thing strongtower 05/14/09 12:04:44 PM
#162   Probably is...the key is getting the execution right....I SherriT 05/14/09 12:01:55 PM
PostSubject