Quote:
| Originally Posted by yakumojpn  Everybody is talking about how important the money management is, but still there's only threads about EMA5 crossing over EMA13 and so on with 30 pips stop and 60 pips limit. I guess there should be much more about money management than some stop loss, limit order, trailing stop, trade per 1% of your account. So please share some clever ideas for my money management, thanks. |
Let's say you choose 2%
If you have USD 100 ... you risk USD 2 (calculate appropriate stop loss that's equivalent to this USD 2). If your fund is small, consider using brokers like Oanda (you can even buy 1 unit).
Let's say you lose ... you are left with USD 98.
Next trade, you risk 2% of USD 98 ...
If you notice, when you are on a winning streak (experienced trader has more winning streaks than newbies do) .. you will be betting bigger and bigger each time ... this has the compounding effect. You bet more and more with the "markets" money. Many traders in Market Wizards "trades bigger and bigger when they are on a winning streak".
Fixed % risk is easy and it gets the job done. If you dont trust me on this, trust Merlin .. LOL.
If you use a broker that allow 1 unit lot size, it's very difficult for even a newbie to completely destroy his account if he follows this fixed % rule. Imagine this situation:
You have a fund and for every person you meet, you tell them to take 2% of the fund. Guess how many person you need to meet to finish the fund? Answer : the fund will never finish (ideally).
What happens if you tell everyone to donate 2% of the fund instead ? The fund will grow again exponentially no matter how much money has been taken out before.
In this business, as long as you survive the battle, you will most probably win. It's just a matter of time.
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