What is money management? Is it martingale? | Forex Factory

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What is money management? Is it martingale?

  • #1
  • First Post: Oct 22, 2018 9:44pm Oct 22, 2018 9:44pm
people say "to make money The key points are money management and discipline",
i wonder what is money management? is it martingale?
you cant predict the future price. so when should you add your position ? how did you know you wont fail?
  • #2
  • Oct 23, 2018 12:39am Oct 23, 2018 12:39am
It means position sizing correlated to your risk. Always keep your trading volume in line with your balance/equity.

Besides that you NEVER know if a trade will be profitable or not. But that is not a problem, not at all. In case you find this irritating, you still have a long journey to go.
  • #3
  • Oct 23, 2018 1:28am Oct 23, 2018 1:28am
Quoting chineser
i wonder what is money management? is it martingale?
Casino's are profitable ventures because of the belief that you can 'win it back'. I am 125% guilty of using martingale strategies at the roulette table but it is a game I accept that the gambler's fallacy is real and it has cost me time and time again. The benefit is that it only costs you what you have on the table.

Trying to cover trade losses by 'doubling down' over and over is begging for a margin call.
Bear by name, bearish by nature
  • #4
  • Oct 23, 2018 7:39am Oct 23, 2018 7:39am
Quoting chineser
people say "to make money The key points are money management and discipline", i wonder what is money management? is it martingale? you cant predict the future price. so when should you add your position ? how did you know you wont fail?
Simply, use only 1-2% risk reward ratio and avoid over trading! It’s an unpredictable market; so we should take extra care of it.
  • #5
  • Oct 23, 2018 7:41am Oct 23, 2018 7:41am
Quoting chineser
people say "to make money The key points are money management and discipline", i wonder what is money management? is it martingale?
While its important, ITS NOT the key point to actually make money trading; its a combination of knowing how to analize a chart and place the trades and the proper way of thinking.. and NOO there is no such thing as "trading its 90% mindset" or whatever people says this days, if you have the "mindset" as the internet say and you STILL DONT KNOW how to trade...you are NOT going to make it, period.

Quoting chineser
you cant predict the future price. so when should you add your position ? how did you know you wont fail?
You can not "predict" wich implys that you know exactly to the last pip up/down what its going to happen and when, BUT you can forecast what could possibly happen in a given point in time with a high level of accuracy (if you know what you are doing of course) and THATS what you trade: the odds in your favor


Quoting beardata
{quote} Casino's are profitable ventures because of the belief that you can 'win it back'. I am 125% guilty of using martingale strategies at the roulette table but it is a game I accept that the gambler's fallacy is real and it has cost me time and time again. The benefit is that it only costs you what you have on the table. Trying to cover trade losses by 'doubling down' over and over is begging for a margin call.
True, its just a "revenge" way of thinking when you have no idea what are you doing and a sure way of lossing everything eventually
  • #6
  • Oct 24, 2018 7:42am Oct 24, 2018 7:42am
Martingale is one of the strategies, which could generate a steady grow. However it is one of most risky trading methods, because it could blow your account after few multiplies, in case your margin gets insufficient. That's why it should be used with low risk settings, and the balance should be ready for 30-40 multiplies minimum.
  • #7
  • Edited 5:06pm Oct 25, 2018 4:49pm | Edited 5:06pm
Quoting chineser
people say "to make money The key points are money management and discipline", i wonder what is money management? is it martingale? you cant predict the future price. so when should you add your position ? how did you know you wont fail?
Nice that someone is asking about something other (and rather more important) than a killer entry signal. You are right to consider carefully the concepts of MM and discipline, they are crucial to long term consistent profitabilty, whatever the trading strategy employed.

MM is essentially how you look after your trading bankroll, your account balance. Remember always: no account means no trading, so look after it well! It is closely bound to risk control, discipline and consistency of behaviour.

The basic rule is trade small: only risk a small amount (<2%) of your account on any one trade. Never get into a position where you are betting the ranch (risking the account) on the outcome of a single trade. Trading is not about that, it's about coming out on top in a probabilistic way over a long sequence of small, consistently traded, strictly risk controlled, speculations. All of this requires discipline and emotional stability, especially when it comes to dealing with the inevitable many losers you will incur.

Martingale is essentially almost guaranteed account suicide. If you keep adding to losers in the hope they will turn around for you, you will most times get away with it as markets display a strong reversion to mean tendency, and averaging price reduces how far the market needs to come back to you to get out even.

However, sooner or later you are going to hit a powerful trend move that will not stop until you run out of money. The longer you trade the more certain this final outcome will be and you are finished: no more account so no more trading.
If you want a solid rule on MM it is this: Don't martingale!

As for adding to a winning position, that is pyramiding and at least here you are playing with house money (open profits). But you still have to be very careful with your exit points becase if the market rapidly switches direction you now have an increased position to very quickly collapse badly on you. If you are not an experienced trader I really wouldn't start pyramiding either, it is dangerous in MM terms.
  • #8
  • Oct 25, 2018 5:31pm Oct 25, 2018 5:31pm
Money management is protecting your bankroll. Ensuring you live to trade another day.

Not risking your entire balance on one trade, but rather risk the same amount per trade.
  • #9
  • Oct 26, 2018 9:07pm Oct 26, 2018 9:07pm
Trading Forex profitably demands a high level of discipline and a strategy helps you to stay focused and avoid emotional trading which has proven to be the downfall of many traders.
  • #10
  • Oct 27, 2018 1:23am Oct 27, 2018 1:23am
This depend with according to the person. some like martingale and some like non martingale. if you like martiganle thats very risky and you need to have good understanding and good dicipline to how to do that . and when to add the next order and which mutification to use acording to your balance. becuase too tight pipstep and too high multification can kill your account withing days. with martingale if you getting to a strong trend you need to me paticne to catch a good reversal point for your next order. if you add too many orders withing small range and price still going against you thats dangorous.

if you like nonmartingale you need to have good R/RW ratio and always need to stick to same stoploss and same take profit.
  • #11
  • Nov 8, 2018 9:25am Nov 8, 2018 9:25am
I think the Martingale strategy could be profitable if the parameters are set carefully and safety. This backtest is a great example, which shows how martingale can be profitable with around 200 deposit.
Attached Image (click to enlarge)
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  • #12
  • Nov 8, 2018 9:28am Nov 8, 2018 9:28am
Quoting DwainUK
I think the Martingale strategy could be profitable if the parameters are set carefully and safety. This backtest is a great example, which shows how martingale can be profitable with around 200 deposit. {image}
Sorry Dwain to crash your party, but the only thing your backtest shows is 25% quality - which means it is useless. Sorry.

I bet with my 99,9% data including slippage it would fail most likely.
  • #13
  • Nov 13, 2018 8:16pm Nov 13, 2018 8:16pm
You need MORE practice for money management. Start with a Demo account to learn.
  • #14
  • Nov 14, 2018 8:04am Nov 14, 2018 8:04am
Quoting Butterscotch
Trading Forex profitably demands a high level of discipline and a strategy helps you to stay focused and avoid emotional trading which has proven to be the downfall of many traders.
Emotions always hampers profitable trading environment and practically there is no way to avoid it in spite of having real discipline, for that reason sometimes we have to depend on automated trading system, for something change.
  • #15
  • Nov 18, 2018 6:25am Nov 18, 2018 6:25am
Hello! I just recently got into forex.

I have read so much information, but i have yet to fully understand how margin availability works. Well I think I know, but not 100% sure


For instance, if my margin used reaches 100% (going opposite of what I predicted) would it automatically pull out more money from my margin available ?
If it does, Margin call would take place when the margin available is of no more?
In addition, margin availability is calculated by - Margin available / value per pip in the current trade?


My apologizes. It is because I think I was EXTREMELY close to happening to me without evening know what happened until I researched more this past weekend. I dodged a bullet.
  • #16
  • Nov 23, 2018 1:42am Nov 23, 2018 1:42am
Money management and risk control are key for successful trading. Most people knows that risking the entire amount of his funds in one trade is a bad idea, if not ridiculous.
  • #17
  • Dec 14, 2018 3:02am Dec 14, 2018 3:02am
Quoting Lebronjon
Hello! I just recently got into forex. I have read so much information, but i have yet to fully understand how margin availability works. Well I think I know, but not 100% sure For instance, if my margin used reaches 100% (going opposite of what I predicted) would it automatically pull out more money from my margin available ? If it does, Margin call would take place when the margin available is of no more? In addition, margin availability is calculated by - Margin available / value per pip in the current trade? My...
The system automatically calculates your free margin as a “margin level” in %. When you open positions, your free margin is decreasing => therefore, your margin level is decreasing as well. According the new ESMA trading conditions, when your margin level goes below 75%- a Margin call function will be activated, however keep in mind that his is only alert. If your margin level goes below 50%- an automatic Stop out function will be activated, then the order with biggest losses will be closed.
  • #18
  • Dec 14, 2018 3:38am Dec 14, 2018 3:38am
Quoting UlliC
Money management and risk control are key for successful trading. Most people knows that risking the entire amount of his funds in one trade is a bad idea, if not ridiculous.
What you think, there is any different between money and risk management? it’s all about same issue ?
  • #19
  • Jan 31, 2019 4:03am Jan 31, 2019 4:03am
Quoting AdamCrist
{quote} What you think, there is any different between money and risk management? it’s all about same issue ?
For the most part, they are two sides of the same coin. But there is differences in their functions. MM could be your decision how large a position to take on trade entry & the way you allocate funds across the portfolio of instruments. RM involves some statistical models as value at risk, conditional value at risk. The main types of market risk are equity risk, interest rate risk and currency risk.
  • #20
  • Jan 31, 2019 4:05am Jan 31, 2019 4:05am

Did you know that, the Martingale system is the most popular and commonly used roulette strategy? I don’t think we should try it in FX trading. It’s extremely risky.

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