Hello.
I am sharing my hundreds of hours of work with you in a concise thread...
The crux of the problem is here:
http://www.forexfactory.com/showpost...6&postcount=22
I only take about 200 trades a year, and my goal is to compound make account into several 1000% by the end of the year. High risk, high return. To do this with fixed fraction, I'd need to risk between 8 and 15% per trade. The problem is, after a few losses, you are below 50% of your highest balance, which is unacceptable.
My MM goes like this.... I look back at the last 8 years of my trades, and find the highest PIP DRAWDOWN I incurred. I divide my HIGHEST BALANCE by that (and then by 10, to account for $/lot), and will trade that lot size until a new higher balance is achieved, in which case I recalculate the lot size.
I do not position size my trades by dividing a percent of my account by the stop.
This method eliminates the problem I posted the hyperlink to. Unfortunately, historical drawdown should be simply a GUESTIMATION of what drawdown is expected.... new higher drawdowns in the future (compared to the past 8 years) are inevitable. So, to compensate for this, if my account draws down 33%, I increase my "drawdown divisor" by a factor of 1.5..... the same is true if the account draws down 66%.... then my drawdown divisor increases again to 2X the original.
Is there risk for bankrupting the account? YES! Is this a happy medium between bankrupting the account and making huge profits? YES!
This money management is strictly concerned with pip drawdowns.... and new pip highs ARE CRITICAL. you are being paid for performance.
Here is 2008 with this method. the graph is based on about 2500 green pips on the year.
PLEASE MAKE SURE YOU READ THE BOTTOM HALF OF THIS POST BEFORE LEAVING:
http://www.forexfactory.com/showpost...2&postcount=16
I am sharing my hundreds of hours of work with you in a concise thread...
The crux of the problem is here:
http://www.forexfactory.com/showpost...6&postcount=22
I only take about 200 trades a year, and my goal is to compound make account into several 1000% by the end of the year. High risk, high return. To do this with fixed fraction, I'd need to risk between 8 and 15% per trade. The problem is, after a few losses, you are below 50% of your highest balance, which is unacceptable.
My MM goes like this.... I look back at the last 8 years of my trades, and find the highest PIP DRAWDOWN I incurred. I divide my HIGHEST BALANCE by that (and then by 10, to account for $/lot), and will trade that lot size until a new higher balance is achieved, in which case I recalculate the lot size.
I do not position size my trades by dividing a percent of my account by the stop.
This method eliminates the problem I posted the hyperlink to. Unfortunately, historical drawdown should be simply a GUESTIMATION of what drawdown is expected.... new higher drawdowns in the future (compared to the past 8 years) are inevitable. So, to compensate for this, if my account draws down 33%, I increase my "drawdown divisor" by a factor of 1.5..... the same is true if the account draws down 66%.... then my drawdown divisor increases again to 2X the original.
Is there risk for bankrupting the account? YES! Is this a happy medium between bankrupting the account and making huge profits? YES!
This money management is strictly concerned with pip drawdowns.... and new pip highs ARE CRITICAL. you are being paid for performance.
Here is 2008 with this method. the graph is based on about 2500 green pips on the year.
PLEASE MAKE SURE YOU READ THE BOTTOM HALF OF THIS POST BEFORE LEAVING:
http://www.forexfactory.com/showpost...2&postcount=16