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....