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-   -   Whats your best money management method? (https://www.forexfactory.com/showthread.php?t=956214)

Aar Oct 20, 2019 10:04am | Post# 1

Whats your best money management method?
 
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 will be continuously edited. Please show respect to fellow traders.

Best Regards.

EF5 Oct 20, 2019 11:55pm | Post# 2

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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.

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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.

Aar Oct 21, 2019 12:08am | Post# 3

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...

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.

EF5 Oct 21, 2019 6:15pm | Post# 4

{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.
Thanks Aar, this was a great idea for a thread! What kind of money management or portfolio strategies do you implement?

Macd-rsi Oct 27, 2019 11:08pm | Post# 5

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.

Macd-rsi Oct 27, 2019 11:12pm | Post# 6

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.

LloydOz Oct 28, 2019 2:26am | Post# 7

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.

LloydOz Oct 28, 2019 2:41am | Post# 8

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.
There are two, maybe three, unknowns in the equation.

1. I

2. Lots

3. x.

I haven't heard of balance-sol.

Macd-rsi Oct 28, 2019 3:17am | Post# 9

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I haven't heard of balance-sol.
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EF5 Oct 28, 2019 7:21pm | Post# 10

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...
I'm a little confused, could you show us an example?

{quote} ====== {image}
Live account? Not too shabby Macd-rsi.

Macd-rsi Oct 28, 2019 10:22pm | Post# 11

{quote} I'm a little confused, could you show us an example? {quote} Live account? Not too shabby Macd-rsi.
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.
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.

Macd-rsi Oct 28, 2019 10:27pm | Post# 12

BBB Base currency
QQQ Quote currency
DDD Dominating currency= account currency = usually USD.

Macd-rsi Oct 28, 2019 10:39pm | Post# 13

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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

Macd-rsi Oct 28, 2019 10:56pm | Post# 14

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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
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Macd-rsi Oct 28, 2019 11:05pm | Post# 15

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.



Macd-rsi Oct 28, 2019 11:10pm | Post# 16

what is I?
I is a very smart variable related to pair speed or velocity.
Speed of EURUSD differs from GBPNZD speed.

Macd-rsi Oct 28, 2019 11:14pm | Post# 17

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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



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for currencies, especially EURUSD:

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



Macd-rsi Oct 28, 2019 11:44pm | Post# 18

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assume leverage R=100 not 400, for explanations:
unfortunately I don't find demo account with 400:1

7- The leverage on this pair with your broker is 400:1 --------- R=400
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Macd-rsi Oct 28, 2019 11:52pm | Post# 19

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 ] = ???

Macd-rsi Oct 29, 2019 1:08am | Post# 20

= [ 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 --


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