Bad time to really dig into money management? | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Alternative Trade Management/Money Management Methods 3 replies

Money Management..keeping the money... 39 replies

Money Management / Risk Management 24 replies

Help with Money Money Management Please! (Free EA) 4 replies

How to get into money/fund management? 6 replies

Bad time to really dig into money management?

  • #1
  • First Post: Edited 6:06pm Jan 16, 2015 8:55am | Edited 6:06pm
I'm interested in seeing what folks at FF REALLY do for money management. I have my own tactics that I'll share as this thread develops.

- What's your take on FX in general? (explosive growth? move profits from other endeavors, trading or not to continue growth? as examples..)
- What do you consider your primary money management tool for FX trading?
- Describe your understanding of what actually takes place (reductions, commissions, spreads, etc..) in terms of money in your account when you place a trade

..In the wake of the CHF craziness with brokers dropping like flies and margin calls + obligations beyond acct size coming into play like never before, this seems it should be a primary topic..This thread isn't limited to the current time period where the CHF move is in the spotlight - continuing discussion and ideas to adapt to market changes are certainly acceptable.

Comments deemed negative or completely irrelevant will be moderated as appropriate and may result in you not being able to post on this thread.

The intent here isn't technical analysis methods. There's enough of those but I haven't seen much beyond "use good money management" and I'm interested in developing my own mechanics and hopefully contributing something to this community in the process.

A little more about myself:

- involved in FX since about 2003
- some time away starting in 09.5 or so, just coming back in april, 2014
- during the break I was working on a theory pretty extensively with the EUR/USD
- Coming back I decided it was time to live trade the theory and my pair of choice was the AUD/USD
- Since then I've branched out a little to GBP/AUD, GBP/NZD, NZD/USD but for the most part I keep the number of pairs traded fairly low
- I have intentionally stayed away from EUR (due to negative interest rates) but probably should've at minimum set a short in June...won't be the first time I missed something
- I was completely out of the way of the CHF debacle. I just never have had an "attraction" to it, so, I've kept my money away from it. Not a thing wrong with it. I just don't trade it. Same goes for the JPY.
"Holy Grail" exists - accepting where is the first step.
  • #2
  • Jan 16, 2015 9:03am Jan 16, 2015 9:03am
One good tip that I got a few years ago is to only keep enough capital in your account to last you five trades. Let's assume you have $50k to trade and you risk 1% per trade. Instead of having all your $50k locked up keep only $2,500 at your broker and the rest in a liquid money market account.
  • #3
  • Jan 16, 2015 10:27am Jan 16, 2015 10:27am
Quoting EnoFX
One good tip that I got a few years ago is to only keep enough capital in your account to last you five trades. Let's assume you have $50k to trade and you risk 1% per trade. Instead of having all your $50k locked up keep only $2,500 at your broker and the rest in a liquid money market account.
Great tip IMO...Thanks for swinging through Eno!
"Holy Grail" exists - accepting where is the first step.
  • #4
  • Jan 16, 2015 3:31pm Jan 16, 2015 3:31pm
Great thread! I'll subscribe to this. Not a topic often discussed on FF.

I do something similar to EnoFX.

I use my broker account as a margin account only. I have it's leverage set to 500:1 and keep less than 5% of my equity in there at any time. The 95% of my equity is in a high interest savings account.

New traders will often see the 500:1 number and freak out. In essence, my true leverage based on my entire equity never changes from 1:1.

As a result, even if my broker goes bust (which is a pretty realistic scenario given recent events) I'll only lose a small percentage of my equity. Plus I'm gaining interest on the rest - which a broker would rarely pay.

I keep money management strategies similar to Jack Schwager's Market Wizards in that I have a maximum daily and weekly loss that I will tolerate and a maximum total exposure at any one time.

I also will never over-expose myself to two currency pairs with the a common base or quote currency e.g. having a trade in EUR/AUD and AUD/USD.
Follow me on twitter @FxLester
  • #5
  • Jan 16, 2015 6:07pm Jan 16, 2015 6:07pm
Thanks Lester. I've never heard of Jack Schwager or anything about him. Happy to hear some more (links, etc.) when you have opportunity.
"Holy Grail" exists - accepting where is the first step.
  • #6
  • Jan 16, 2015 6:47pm Jan 16, 2015 6:47pm
Quoting VaBikePacker
Thanks Lester. I've never heard of Jack Schwager or anything about him. Happy to hear some more (links, etc.) when you have opportunity.
Yeah no problems. Jack Schwager wrote a series of quite popular books called the Market Wizard's series. The first one I believe was written about 1987. He essentially interviewed the worlds top traders with big names which may ring a bell such as Paul Tudor Jones, Marty Schwarz, Linda Rashke. Traders that worked with George Sorros. And many others.

The great thing about these books is that they are simply transcriptions of the interviews he had with these million and billion dollar traders.

The usefulness of these books is that they are not only entertaining, but the same themes keep recurring in each trader no matter what their strategy is. Thing's like their discipline, their money management and resilience.

He wrote three books in this series and my two favourites are Market Wizards and The New Market Wizards.

Kathy Lien wrote a similar book with less known and less verified traders called Millionaire Traders.
Follow me on twitter @FxLester
  • #7
  • Jan 16, 2015 6:56pm Jan 16, 2015 6:56pm
Quoting FxLester
{quote} Yeah no problems. Jack Schwager wrote a series of quite popular books called the Market Wizard's series. The first one I believe was written about 1987. He essentially interviewed the worlds top traders with big names which may ring a bell such as Paul Tudor Jones, Marty Schwarz, Linda Rashke. Traders that worked with George Sorros. And many others. The great thing about these books is that they are simply transcriptions of the interviews he had with these million and billion dollar traders. The usefulness of these books is that they are...
Cool thanks!!
"Holy Grail" exists - accepting where is the first step.
  • #8
  • Jan 16, 2015 11:51pm Jan 16, 2015 11:51pm
Money management and risk management are not the same thing. If you are talking about money management only, I would consider that a topic about stops. Risk management is about position sizing. This is how I see it, your mileage may vary.
If you are good at something, never do it for free--Joker
  • #9
  • Jan 17, 2015 5:47am Jan 17, 2015 5:47am
Quoting jmn5611
Money management and risk management are not the same thing. If you are talking about money management only, I would consider that a topic about stops. Risk management is about position sizing. This is how I see it, your mileage may vary.
Agree - thanks for stopping by JMN!
"Holy Grail" exists - accepting where is the first step.
  • #10
  • Jan 18, 2015 11:51am Jan 18, 2015 11:51am
So there are a few folks who have stopped by....thanks!!

I'm wondering: How many can tell me from the specs below how far the market has to move against you for you to achieve a margin call on your account?

Account Balance: $4000 (mini)
Trade entered: SHORT GBP/AUD @1.8000
Price at time of posting: 1.8406
Trade Size .1 (.10/pip USD)
"Holy Grail" exists - accepting where is the first step.
  • #11
  • Jan 18, 2015 12:06pm Jan 18, 2015 12:06pm
Good topic.No matter how many trades I have open ,I simply never go below 50% of my balance (not NAV) in available margin.This may be necessitated by either closing off open(hopefully green!) trades or simply depositing funds.
Also if I start off a long term trade I only ever look at positive swap.
Where price is now, it has been before, and will be again.
  • #12
  • Jan 18, 2015 12:15pm Jan 18, 2015 12:15pm
Quoting VaBikePacker
So there are a few folks who have stopped by....thanks!! I'm wondering: How many can tell me from the specs below how far the market has to move against you for you to achieve a margin call on your account? Account Balance: $4000 (mini) Trade entered: SHORT GBP/AUD @1.8000 Price at time of posting: 1.8406 Trade Size .1 (.10/pip USD)

What is the leverage?
If you are good at something, never do it for free--Joker
  • #13
  • Jan 18, 2015 12:20pm Jan 18, 2015 12:20pm
Quoting VaBikePacker
What do you consider your primary money management tool for FX trading?
Common sense.

Cheers,
FxTurtle
Fear prevent possibilities, and so does Greed
  • #14
  • Jan 18, 2015 12:39pm Jan 18, 2015 12:39pm
Quoting jmn5611
{quote} What is the leverage?
I think the leverage is 50:1
  • #15
  • Jan 18, 2015 12:40pm Jan 18, 2015 12:40pm
Quoting jmn5611
{quote} What is the leverage?
well that's a slightly important piece of info...

50:1
"Holy Grail" exists - accepting where is the first step.
  • #16
  • Jan 18, 2015 12:52pm Jan 18, 2015 12:52pm
Quoting VaBikePacker
So there are a few folks who have stopped by....thanks!! I'm wondering: How many can tell me from the specs below how far the market has to move against you for you to achieve a margin call on your account? Account Balance: $4000 (mini) Trade entered: SHORT GBP/AUD @1.8000 Price at time of posting: 1.8406 Trade Size .1 (.10/pip USD)
It is very powerful question... I think that whoever knows the answer for this questions has a good knowledge of Risk and Money Management.
  • #17
  • Jan 18, 2015 12:54pm Jan 18, 2015 12:54pm
Quoting VaBikePacker
So there are a few folks who have stopped by....thanks!! I'm wondering: How many can tell me from the specs below how far the market has to move against you for you to achieve a margin call on your account? Account Balance: $4000 (mini) Trade entered: SHORT GBP/AUD @1.8000 Price at time of posting: 1.8406 Trade Size .1 (.10/pip USD)
Leverage is irrelevant.
Where price is now, it has been before, and will be again.
  • #18
  • Jan 18, 2015 12:56pm Jan 18, 2015 12:56pm
Quoting VaBikePacker
{quote} well that's a slightly important piece of info... 50:1
You will get margined with a 4k account using dime lots at 6.6042 if you short this pair at 1.8

At that time you will have lost 3945.76

This assumes the base pairs of A/U and G/U retain their tick value.
If you are good at something, never do it for free--Joker
  • #19
  • Jan 18, 2015 12:59pm Jan 18, 2015 12:59pm
Quoting Jenx
{quote} Leverage is irrelevant.
It very much matters, the lower the leverage, the more of your account gets preserved if you get called.
If you are good at something, never do it for free--Joker
  • #20
  • Jan 18, 2015 1:00pm Jan 18, 2015 1:00pm
Quoting jmn5611
{quote} You will get margined with a 4k account using dime lots at 6.6042 if you short this pair at 1.8 At that time you will have lost 3945.76 This assumes the base pairs of A/U and G/U retain their tick value.
At 0.10 usd per pip? How does that work?
Where price is now, it has been before, and will be again.
0 traders viewing now