Money Management

Money Management
When you go wrong, how much you withstand, what decission you take to hold or exit.....Money management play role.

Let's say in one situation you see two buy spot . we are not sure if market will bounce from first spot.
We take position at first spot. and we found that market fall further 80pip to second buy spot.
Now if you take big pos at first possible buy spot then your account is under threat and you will hesitate to add second pos at second buy spot. but if you distribute your order in two spot...then if first spot fail then in most cases price comes back to entry point.
in this case you win in second pos and exit at breakeven or small loss in first pos..and overall you are in profit.
If second spot is also fail then. then you need to be carefull, and use emergency plan to protect account.

Some times market do short squezz to take out weak account by moving 100pip 200pip against possible spot.
To sustain market in long term you need to use money management principle properly.
In case of Carry trade unwinding or any important news good/bad market makes huge move. and if you are on wrong side...then threat of account blow.

To sustain market in long term you need to use money management principle properly.
In next post we will discuss best way to use money management.
Also share forum member views

Best Regards
Ramdas

This is real interesting subject.
Under money management you plan to take only 2% risk.
Say you have 10,000 USD account.
As per 2% risk you can take only 200$ risk on your account and according to it you adjust lot size and SL.
Now think in other direction.
if you loose 2% 5 times in a row you loose 10% of your account which is 1000$
but if you loose 2time and then win next 5 trades you win 6%
Now if you open account only 1000$ account and keep 9000$ safe as backup money.
this backup money you use in case you loose 2% in a row and blow 1000$
This way you are risking only 10% 1000$ and keeping 90% that is 9000$ in your safe place.
trade the way you are trading like you have 10,000$ but on only 1000$.
this concept looks abstract and looks difficult to digest but there is some logic in it.
if you know exact entry, you don't need big account.
More account size...more emotion play and more threat of loosing account since you will take big pos out of greed.
You need to be smart to take pos at right spot and get sure pips.

Just think on this and post your view.

Best Regards
Ramdas

Admin wrote:

This is real interesting subject.
Under money management you plan to take only 2% risk.
Say you have 10,000 USD account.
As per 2% risk you can take only 200$ risk on your account and according to it you adjust lot size and SL.
Now think in other direction.
if you loose 2% 5 times in a row you loose 10% of your account which is 1000$
but if you loose 2time and then win next 5 trades you win 6%
Now if you open account only 1000$ account and keep 9000$ safe as backup money.
this backup money you use in case you loose 2% in a row and blow 1000$
This way you are risking only 10% 1000$ and keeping 90% that is 9000$ in your safe place.
trade the way you are trading like you have 10,000$ but on only 1000$.
this concept looks abstract and looks difficult to digest but there is some logic in it.
if you know exact entry, you don't need big account.
More account size...more emotion play and more threat of loosing account since you will take big pos out of greed.
You need to be smart to take pos at right spot and get sure pips.

Just think on this and post your view.

Best Regards
Ramdas

true..........if we know exact direction or spot place to enter will make life easier.trade only right position and patience is more important.but human always fails when become that level.how to control it

Here is example of Account blowing in case of Big move during carry trade unwinding.
if you are unaware of BAD news and try to pick at SMA...you can blow account.
in chart shown price pass through all SMA and found support at last SMA2400 on H4, it also fall 300pip below H4 SMA2400 but quick pull-up.
After that price move well respecting all SMA.
If you maintain small account size which you can afford to loose..and withdraw profit above it and keep in safty fund, then you can save from Big blow. if you hold Big size account and dont use Stop...you can get Big blow.

When everything is falling...don't try to catch falling Knife.

thats what happened to me once, i learned my lesson now! I lost about 15% only because i though TA is a master and did carry trades few times which was a total disaster. I had about 4 possitions opened then and the good thing I did back then, was that all those possitions were about 1% of my account. I did get a loss, but have not blowned my account.