BunnyGirl money management questions

Hi all,

I was looking through the Bunnygirl system yesterday (Stockwets updated version) and I'm still abit confused about a few things on money management:

it says to use no more than 2% of your account for each trade. Does this mean when buying 4 lots the total would be 2%? or Is each lot 2%, if so does this figure change after buying the first lot? Eg:

Account size: $1000
2% : $20
First lot: 2% of 1000 = $20
Second lot: 2% of 980 = $19.6
Third lot: 2% of 960 = $19.2..............and so on.

Also I dont really understand the quote at the end by Bunnygirl on position sizing. Could anyone give me some more examples of how this works?

thanks in advance,

Arcane.

total risk for trade is

stop*pipsize*lots

so say you had $2000 and wanted to risk 2%
your risk target would be $40(2000x2%)

if you have a mini account with $1 pips and a 20pip stop
$1pip x 20 stop = $20 risk per lot
40/20 = 2 lots could be risked

the big formula for fixed ratio is

lots to risk = (capital x risk %)/(pip size*stop size)

so say:
$5000 capital
2% risk
35 stop
$1 pips

lots to risk =( 5000 x 2%)/(1*35)
lots to risk = 100/35 = 2.85
so you can risk 2

Thanks Witchazel, your explanation has made it abit clearer for me. Another question: do all mini accounts have a pip size of $1 or was that just an example?

thanks again,

Arcane.

all minis are 1/10 of a normal pip. they do have micros too which are 1/100 of a normal pip.


basically any pair that ends in usd is $10 a pip for standard ($1 for mini and $.10 for micro)
anything with usd at the front and has 4 decimal places, like usd/chf, is 10/current price. so usd/chf at 1.2083 would be 10/1.2083 or 8.28 (mini .82 micro .08)

anything with usd at front and has 2 decimals like usd/jpy is 1000/price. so usd/jpy at 111.75 is 1000/111.75 or 8.94 (mini .89 micro .08)

anything that doesnt have usd in it, just get a pip calculator hehe. you would need to convert both prices then compair them together.


also try to get a micro account if you can and if not get a mini. you can always trade 100 lots of a micro to get 1 standard lot and it is so much easier to manage your money.

like the earlier example if you had a micro

so say:
$5000 capital
2% risk
35 stop
$0.10 pips

lots to risk =( 5000 x 2%)/(1*3.5)
lots to risk = 100/3.5 = 28.5
so you can risk 28 mini lots

with the mini you are actually risking 28*35*$.1 or $98 which is 1.96% of your capital instead of 2*35*1 or $70 which is 1.4% of your capital. The smaller the lots the more accurate you can be. On a standard you could only risk 1*35*10 which is $350 or 7% of your capital (course you could drop your stop to 10pips but then you would prolly get stopped out 3x as much).

Hello,



Bunnygirl's Quote:

This was just the method Bunnygirl used to know when she could move to the next trading level. Throw out the comments about 2% for a second. Bunnygirl was basically saying that she needs enough money to cover 2 consecutive failed trades. Then, she would back into her position size based on that. She stayed at this level until she made enough money so that she could increase her position size. So, if you're working off of $4 per pip, you need enough money to cover a $240 drawdown to start (60 pip loss * $4 = 2 failed trades). She wouldn't trade at $8 per pip until she had earned $480 at the $4 level (60 pip loss * $8 = 2 failed trades).

In my document, I mention that it's "generally advisable" to risk no more than 2% on a trade. In the next sentence, I say that "isn't necessary" and then proceed to give Bunnygirl's MM rules. It's probably a bit unclear, but, Bunnygirl uses different MM rules than what the typical trader will say about using 2%. That's why there isn't any example in the document regarding a 2% rule.

So, let's say you had $5000 capital. If you traded 8.3 lots, you would have just enough capital to cover 2 drawdowns (8.3 * $10 per pip * 60 pip loss = 2 failed trades). Now, you probably wouldn't want to trade at that level because that would pretty much blow out your account if you had 2 consecutive drawdowns. You'd trade somewhere below that account. Maybe then you'd create your own percentage rule that you're comfortable with.

So, to recap, the document doesn't actually say to use 2%, rather, it says that it has been generally suggested to do so but that Bunnygirl uses another approach. It's probably bad writing on my part.

Regards,

stockwet

Thanks for the replies guys, both were very helpful.

Another question: How are the WMA 5, 20 and 100 actually calculated? I guess that meta automatically calculates them but i would like to know the method.

Thanks again,

Arcane.

Here is an explanation of how Weighted Moving Averages are calculated.

http://www1.investopedia.com/univers...ngAverages.asp

The attached file is an MT4 indicator which shows some code for calculating Moving Averages.