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Bad time to really dig into money management?

  • #21
  • Jan 18, 2015 1:05pm Jan 18, 2015 1:05pm
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)
At this point ,you're less than $30 down (And thats if you close)
Where price is now, it has been before, and will be again.
  • #22
  • Jan 18, 2015 1:08pm Jan 18, 2015 1:08pm
Quoting Jenx
{quote} At 0.10 usd per pip? How does that work?
At a dime a pip you are only using about 40 bucks of your total margin at 50:1. So you can draw your account almost to nothing before you get called.
If you are good at something, never do it for free--Joker
  • #23
  • Jan 18, 2015 1:11pm Jan 18, 2015 1:11pm
Quoting jmn5611
{quote} At a dime a pip you are only using about 40 bucks of your total margin at 50:1. So you can draw your account almost to nothing before you get called.
Exactly
Where price is now, it has been before, and will be again.
  • #24
  • Jan 18, 2015 11:49pm Jan 18, 2015 11:49pm
Quoting FxLester
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...
Very wise. I manage risk before any other consideration, but as you say, given recent events the higher risk of brokerage bust we have to factor this as well. I do like your approach.

Although my next broker will certainly be a negative balance protection broker, I'd rather get negative at 5% than 100%.

Thanks for your thoughts Lester, although I didn't take a hit I've been soul searching this weekend as it could have just as easily been me that got wiped out too. I think your approach will be the only way I can see of continuing to trade in these markets. Open ended risk is suicide, and we just entered a whole new game.

Financial Darwinism 101!
"Risk comes from not knowing what you're doing." - Warren Buffett
  • #25
  • Jan 19, 2015 4:15pm Jan 19, 2015 4:15pm
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.
I use a spreadsheet to track my positions and risk, when I would get a margin call etc so get a bit lazy in being able to apply the principles to a different currency pair (I only trade AUD/USD) and work out things like this. I get that when price hits 6.6042 for a 1.8 GBP/AUD short it is 48,042 pip down and for a .1 position size that equates to 4804.2 AUD. I note that you have converted at roughly .82131 to get the $3,945.76 loss at price 6.6042 but don't get why this would be the margin call point. If he had $54.24 USD still in the account isn't the margin requirement only $20 USD and hence there's still a little wriggle room?

Account would be back to zero at 6.6702 based on your assumptions and ignoring that in practice time factor would also come into play given short GBP/AUD would pay positive swap.
Hope for the best, prepare for the worst.
  • #26
  • Jan 19, 2015 7:11pm Jan 19, 2015 7:11pm
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.
Yep this is great idea. but I have few clarifications,

in a case like CHF crash when my trade is close what if my account show a negative balance???? do I have to deposit negative balance???

What kind of a strategy you use to identify your trading capital???
80% effort, 20% luck
  • #27
  • Jan 19, 2015 7:36pm Jan 19, 2015 7:36pm
Quoting dab
{quote} I use a spreadsheet to track my positions and risk, when I would get a margin call etc so get a bit lazy in being able to apply the principles to a different currency pair (I only trade AUD/USD) and work out things like this. I get that when price hits 6.6042 for a 1.8 GBP/AUD short it is 48,042 pip down and for a .1 position size that equates to 4804.2 AUD. I note that you have converted at roughly .82131 to get the $3,945.76 loss at price 6.6042 but don't get why this would be the margin call point. If he had $54.24 USD still in the account...
Hi dab, I just use Oanda's margin calculator.
If you are good at something, never do it for free--Joker
  • #28
  • Jan 19, 2015 8:25pm Jan 19, 2015 8:25pm
Quoting dab
{quote} I use a spreadsheet to track my positions and risk, when I would get a margin call etc so get a bit lazy in being able to apply the principles to a different currency pair (I only trade AUD/USD) and work out things like this. I get that when price hits 6.6042 for a 1.8 GBP/AUD short it is 48,042 pip down and for a .1 position size that equates to 4804.2 AUD. I note that you have converted at roughly .82131 to get the $3,945.76 loss at price 6.6042 but don't get why this would be the margin call point. If he had $54.24 USD still in the account...
Nice - some time ago I built a spreadsheet myself and recently have resurrected the idea with some improvements...(biggest improvement is me learning some more excel functions that make the sheet work better than it did before) - part of the reason for starting this thread was to share it with the community whenever I get around to finishing it...just had some new ideas hit me this evening on a drive back home...
"Holy Grail" exists - accepting where is the first step.
  • #29
  • Oct 13, 2015 6:23pm Oct 13, 2015 6:23pm
So, I've been rather quiet here - my apologies....some changes have come about...

Anyone here a "trading in the zone" reader?
"Holy Grail" exists - accepting where is the first step.
  • #30
  • Oct 14, 2015 6:42am Oct 14, 2015 6:42am
Hi Va,

Money management should be a simple task. I use the Pillow Criterion approach to money management:
If you are still thinking about your positions when your head touches your pillow, cut down to the sleeping point.
  • #31
  • May 4, 2016 10:26am May 4, 2016 10:26am
Quoting Atokys
Hi Va, Money management should be a simple task. I use the Pillow Criterion approach to money management: If you are still thinking about your positions when your head touches your pillow, cut down to the sleeping point.
Nice. I didn't start the thread seeking answers for myself. For quite a period of time my belief in FX has been that this isn't a market to quick riches without an undue amount of risk. My opinion is that this market is a means to gradually grow not explosively grow.

If you want explosive growth, pick options.
"Holy Grail" exists - accepting where is the first step.
  • #32
  • May 4, 2016 8:57pm May 4, 2016 8:57pm
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.
cool tips. thanks!
  • #33
  • Last Post: May 5, 2016 7:00am May 5, 2016 7:00am
Quoting VaBikePacker
For quite a period of time my belief in FX has been that this isn't a market to quick riches without an undue amount of risk. My opinion is that this market is a means to gradually grow not explosively grow.
Ok. Equity growth is a function of one's trading strategy and market conditions. Since the future of the latter is unknowable I have no opinion of the level of graduality or explosiveness to expect out of a particular market.

The currency market is just another part of my diversifed portfolio. Trading a wide range of markets increases the chance of catching a hot trending market that delivers windfall profits.
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