Hello All,
Forex Trading is mix of both art and science. It takes some intuition as well as basic rules of simple concepts to trade the Forex market with any kind of measurable success. One thing I do not see a lot of focus on is money management. Arguably the most important part of trading. I see many threads that tried to discuss it but quickly died. Against my better judgement, I will try and keep a thread alive on this very important part of trading. I guess the best way to begin is touch on how I run my management. Here we go.
I trade the Daily Charts based on EOD, End Of Day, results. My broker is Oanda. At Oanda, we have the ability to trade in Units. 1 Unit = 1 unit of the currency of deposit. For me 1 Unit = $1.00 US. At the start of each month I take my current NAV (Net Asset Value) and use that as the base for every trade taken that month.
In this example my account has $50,000. For every trade in this month I will use 50000 units. That equates to a PIP value of about $5.00 (depends on which pair. Some may be higher or lower depending on exchange rate). My risk is never more than 1.5 percent. Going into any trade this month my max risk is $750.00 (50000 x 0.015 = 750). So max stop-loss is 150 pips or less. At trade time my stop-loss will be the lesser of the last swing high/low or 150 pips.
I run the same routine until the start of the next month. Then I re-do the math and start again. Every 3 months, I prepay any tax due to both Federal and State Officials. At the end of each year I will either get a refund (which is put back into the account) or pay what is due (paid from account balance). I subtract the balance from the start of the year from the ending balance. If the balance is positive I then split it in half, keeping half in my trading account and taking the other half as spendable profit.
My interest for this thread is to discuss why you believe money management takes a back seat to trading methods and styles, despite the fact that with proper money management most any trading method can be pseudo profitable (Thanks TEntropy). How do you manage your trades and why that way? Did you learn it from someone, create it yourself? Do you believe that money management is more important that the strategy itself? Any and all comments welcome, even the dumb ones I know will come along.
Thanks
- Ric
Forex Trading is mix of both art and science. It takes some intuition as well as basic rules of simple concepts to trade the Forex market with any kind of measurable success. One thing I do not see a lot of focus on is money management. Arguably the most important part of trading. I see many threads that tried to discuss it but quickly died. Against my better judgement, I will try and keep a thread alive on this very important part of trading. I guess the best way to begin is touch on how I run my management. Here we go.
I trade the Daily Charts based on EOD, End Of Day, results. My broker is Oanda. At Oanda, we have the ability to trade in Units. 1 Unit = 1 unit of the currency of deposit. For me 1 Unit = $1.00 US. At the start of each month I take my current NAV (Net Asset Value) and use that as the base for every trade taken that month.
In this example my account has $50,000. For every trade in this month I will use 50000 units. That equates to a PIP value of about $5.00 (depends on which pair. Some may be higher or lower depending on exchange rate). My risk is never more than 1.5 percent. Going into any trade this month my max risk is $750.00 (50000 x 0.015 = 750). So max stop-loss is 150 pips or less. At trade time my stop-loss will be the lesser of the last swing high/low or 150 pips.
I run the same routine until the start of the next month. Then I re-do the math and start again. Every 3 months, I prepay any tax due to both Federal and State Officials. At the end of each year I will either get a refund (which is put back into the account) or pay what is due (paid from account balance). I subtract the balance from the start of the year from the ending balance. If the balance is positive I then split it in half, keeping half in my trading account and taking the other half as spendable profit.
My interest for this thread is to discuss why you believe money management takes a back seat to trading methods and styles, despite the fact that with proper money management most any trading method can be pseudo profitable (Thanks TEntropy). How do you manage your trades and why that way? Did you learn it from someone, create it yourself? Do you believe that money management is more important that the strategy itself? Any and all comments welcome, even the dumb ones I know will come along.
Thanks
- Ric
Be humble or get humbled
