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All About Money Management

  • #21
  • Dec 9, 2014 10:59pm Dec 9, 2014 10:59pm
Quoting Chicky
{quote} I quoted this concept of war from Tan Tzu's "Art of War". War is not about killing enemy, but to gain the advantage. Ideas in this book are as good in many fields like Strategic Management and also Trading. I believe many Universities teaching business include this book in their list of reference books for management.
100% agree
MY telegram channel: https://t.me/https://t.me/tnavieurusd
  • #22
  • Dec 9, 2014 11:17pm Dec 9, 2014 11:17pm
Quoting Chicky
Here is our trade at the moment: Don't look at the position size. It is a demo account for testing and I never checked the default lot size before taking the trade. {image}
So you don't base your direction on trends? What made you go short there, what is your TP, and how you stack orders?
  • #23
  • Dec 9, 2014 11:31pm Dec 9, 2014 11:31pm
Now let me explain the philosophy of this money management method.

1. Not always, but most of the times market makes very predictable moves and goes in the direction of key fundamentals. However, the path it chooses in doing so is very choppy. Sometimes, it makes spikes in the opposite direction before heading in the right direction. Other times it goes astray like a headless chicken. So, no matter how smart a trader be, can get trapped in these moves. The first element of this money management method is to stay away from this noise as much as possible. But at the same time, we don't want to lose most opportunities if at times market decides to follow a straight and logical path. One reason for entering this short as trade number 1. USD/JPY started moving south and I entered a short. If you check the latest news they do not favor JPY and therefore this down move is not very reliable based on this news. But I am following a simple method that reads the charts from a distance of 3 feet and focuses only on key fundamentals and not m/m or q/q economic data. I saw it going down and entered a short.

2. Now, if it really wants to go south, may form some kind of a trend. This trend is not visible as yet. That is why it has been decided to enter trade number 2 near the latest high. If price forms a lower high, it should be somewhere there.

3. Now if price makes a lower high and after that goes below our first entry, there is a chance that it is going down. This is where the third entry will be placed.

4. If by then, fundamentals follow the chart, a fourth entry will come with a broken support level as a solid stoploss. I don't have that level as yet, because price has not broken one.

The above 1., 2. and 3 are just broad chart readings / possibilities and nothing to do with the money management. The money management is entering only three small trades with wide stop losses before we have a sense of direction. Once things get clear, there will be a heavier (But not too heavy) entry with a solid tight stop loss at the right time. If that stop loss gets hit the loss should be minimum but if we catch the move at the right time, profit should be much bigger.
The Thief of Wall Street
  • #24
  • Dec 9, 2014 11:38pm Dec 9, 2014 11:38pm
Quoting cfabian
{quote} So you don't base your direction on trends? What made you go short there, what is your TP, and how you stack orders?
As I mentioned in the first post, very little technicals and price level predictions have been left for gods to work out, .................they are doing very little up there and need some work.
The Thief of Wall Street
  • #25
  • Dec 9, 2014 11:43pm Dec 9, 2014 11:43pm
money management is so simple...

put all out when u know it is right time...

Market Nature
  • #26
  • Dec 9, 2014 11:44pm Dec 9, 2014 11:44pm
u must know when u are 100% right...and 100% wrong...

Less trade...more profitable...
  • #27
  • Dec 9, 2014 11:45pm Dec 9, 2014 11:45pm
Quoting Nfp
money management is so simple... put all out when u know it is right time... Market Nature
I am talking about your own money and not other people's money.
The Thief of Wall Street
  • #28
  • Dec 9, 2014 11:48pm Dec 9, 2014 11:48pm
Quoting Chicky
{quote} I am talking about your own money and not other people's money.
yes..im talking my money...

but not all the time i can put all out in market..

the opportunity is always different...

if u want to be consistent..

so simple...always put 5-8% risk every time u trade...

but people are crazy...
  • #29
  • Dec 9, 2014 11:51pm Dec 9, 2014 11:51pm
Quoting Nfp
{quote} yes..im talking my money... but not all the time i can put all out in market.. the opportunity is always different... if u want to be consistent.. so simple...always put 5-8% risk every time u trade... but people are crazy...
Why 5-8% and why not 4-7% or 6-9%?
The Thief of Wall Street
  • #30
  • Dec 9, 2014 11:53pm Dec 9, 2014 11:53pm
Quoting Chicky
{quote} Why 5-8% and why not 4-7% or 6-9%?
its depend on your capital..

it is a range of risk...

not fixed...
  • #31
  • Dec 10, 2014 12:00am Dec 10, 2014 12:00am
Quoting Nfp
{quote} its depend on your capital.. it is a range of risk... not fixed...
Five years ago, I experienced 52 consecutive losers. That means there was not a single winner until I got stopped out 52 times. Using your risk tolerance level of 5% risk per trade, I would have been flipping burgers at Mc Donalds until this day.
The Thief of Wall Street
  • #32
  • Dec 10, 2014 1:17am Dec 10, 2014 1:17am
Quoting Chicky
{quote} Five years ago, I experienced 52 consecutive losers. That means there was not a single winner until I got stopped out 52 times. Using your risk tolerance level of 5% risk per trade, I would have been flipping burgers at Mc Donalds until this day.

Hi Chicky;

What you are doing looks interesting I'll be following.

What you said above about consecutive losers is something most Traders don't even think about. When they start Trading a System/Method they usually have no idea of what can be expected in terms of wining and losing streaks and use the usual 2 or 3% of their accounts.

Traders, for some reason, don't expect to have 10, 20 or 52 losers in a row.

If they where Trading with this expectancy their Risk Per Trade would drop dramatically and there would be far fewer blown accounts.
  • #33
  • Dec 10, 2014 1:55am Dec 10, 2014 1:55am
Quoting Chicky
{quote} Five years ago, I experienced 52 consecutive losers. That means there was not a single winner until I got stopped out 52 times. Using your risk tolerance level of 5% risk per trade, I would have been flipping burgers at Mc Donalds until this day.
Hello Chicky,

Thank for opening thread about MM,I will follow with interest as I think that money and risk management are the biggest enigma in traders world...You can have great strategy and great understanding of markets but if you not have a proper way how to manage your risk it affect on traders psyhology which is the key element number 2 why most traders fail....

About 52 consecutive losers i agree it could be but this also depends on tactics (I mean if you using longer periods with wider sl and tp you can enter in periods od large DD but if you use shorter periods in markets-shorter tp and sl think it is very hard to have that much losers in row or in opposite something isn't right with trader-understanding,greed,suitable strategy,discipline,not following rules etc.)

Regards!
  • #34
  • Dec 10, 2014 2:05am Dec 10, 2014 2:05am
if u get lost 52 times in row..

i recommend you..

stop become a trader...retired...and go find a job in Mcdonald

Trading is not an easy...



the world will end soon..

better u stick out of this arena and think about other future..a lot of good opportunity out-there..
  • #35
  • Dec 10, 2014 4:56am Dec 10, 2014 4:56am
Here is one of my previous posts to help you guys out:

First of all, like i stated before it depends on how your doing it, and the whole idea is that when you do lose your only losing on a slither/fraction of a contract therefore the losses are really kept to the bare minimum....it rubs people the wrong way because in the simplest form your right, you will lose if you do it the conventional way, but there are a couple of ways and a few more caveats to this discussion that your not aware of that negate the negatives about position sizing that you believe....

cut losses short and let profits run is the golden rule, if you look and concenrate your efforts on the cut losses short part of it in terms of position sizing a la van tharp you'll start to realize and come to open your eyes the the negatives you speak of can be negated and therefore when you do have a winner that you ride and add on to it more than makes up for all the little losses, and this is what long term sustainability is all about, and with this type of system im also making the most out of my wins, so if a trade goes 100 pips in my favour instead of me making lets say 1000 dollars because i position sized correctly on that same 100 pips i make roughly 1700 dollars instead, so now when im losing i only lose a fraction of a contract at a very miniscule cost compared to the monster gains i make when i win.....

my trading didnt take off until i started to concentrate on position sizing in relation to cutting those losses short, i knew how to let profits run and build onto a trend but i had problems with that because when the market retraced and came back i lost money on the trade and the scale ins, then i started focusing on how i can scale in without being exposed to retracements and crashing the position sizing and therefore i started to concentrate more on the cutting losses short part of it and its made a huge difference in my trading performance, and in the end my friend the simplest mathematical fact you cant ignore is at the end of the month wheather your wins outweigh your losses....cheers
  • #36
  • Dec 10, 2014 4:57am Dec 10, 2014 4:57am
Money Management and Strategy (Sun Tzu), my favorite 2 topics, i will be watching with interest.
Master Your Setup, Master Your self. (NQoos)
  • #37
  • Dec 10, 2014 9:22pm Dec 10, 2014 9:22pm
This is what I did today.

Closed usd/jpy short at noon EST, that is, one hour after London Close and 4 hours after NY open. As mentioned earlier in one of my previous posts here, timing is very important. In the afternoon, opened a small long (lot size almost equal to the first trade that I closed at noon). Waited to see what happens next, watching behavior of both Eur/USD and USD/JPY. To me it looked that price wanted to park at a level in preparation of Tokyo Open. The parking place for EUR/USD was around 1.2480 and for USD/JPY was 117.50. When 117.50 responded just before Tokyo Open, I went long with a trade little more than 10 times my earlier long with tight stop loss somewhere near 117.50. Now, there was a possibility of 4 things.
1) Price continues going down
2) It goes down a little bit and then comes back
3) It moves up
4) It moves up and then comes back

At Tokyo Open, it showed some noise and then made a little move up. This is where I closed my longs.

Whatever I got from this trade is now my money. It is not available for unnecessary risk taking.
Attached Image (click to enlarge)
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The Thief of Wall Street
  • #38
  • Edited 10:18pm Dec 10, 2014 9:35pm | Edited 10:18pm
Currently Eur/Usd is around 1.2450. If it parks 50/60 pips above this level for London Open, a quick short is worth taking a chance.

The point is, no risk unless the time is right. Yes, a small trade or a small pending order is alright, but no serious trade unless market makes the first move to show its intentions.
The Thief of Wall Street
  • #39
  • Dec 10, 2014 10:04pm Dec 10, 2014 10:04pm
Quoting stevepatt
{quote} Hi Chicky; What you are doing looks interesting I'll be following. What you said above about consecutive losers is something most Traders don't even think about. When they start Trading a System/Method they usually have no idea of what can be expected in terms of wining and losing streaks and use the usual 2 or 3% of their accounts. Traders, for some reason, don't expect to have 10, 20 or 52 losers in a row. If they where Trading with this expectancy their Risk Per Trade would drop dramatically and there would be far fewer blown accounts....
This is a trap for starters. They see a trader taking 1% risk per trade and blindly follow this rule without checking if that trader trades on Daily or Monthly time frame and takes how many trades in a month. A person taking 5 trades a month with 1% risk per trade cannot lose more than 5% in a month but another person taking 5 trades a day on 15M can lose his underwear (or maybe Panties) taking 1% risk per trade.

Another thing. Even if a person can achieve 70% success rate, never knows if first 300 trades out of total 1,000 will be the losers. LOL.
The Thief of Wall Street
  • #40
  • Dec 10, 2014 10:11pm Dec 10, 2014 10:11pm
Quoting Zokynho
{quote} Hello Chicky, Thank for opening thread about MM,I will follow with interest as I think that money and risk management are the biggest enigma in traders world...You can have great strategy and great understanding of markets but if you not have a proper way how to manage your risk it affect on traders psyhology which is the key element number 2 why most traders fail.... About 52 consecutive losers i agree it could be but this also depends on tactics (I mean if you using longer periods with wider sl and tp you can enter in periods od large...
This is new thread and yet to set its tone.You people will take it forward.

What a coincidence. Your point about how shorter and longer periods affect money management was touched in preceding reply. You have a very good point. One cannot separate money management from the time frames or size of the moves. Smaller time frames make it difficult.
The Thief of Wall Street
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