Money management is extremely important to be a successful trader.
Without it, rarely succeed in the long run. With your paid subscription, we will give our operators specific guidelines that must be followed according to the balance of your account.
As a general rule, it is usually a good guide to never trade more than 10% of your account equity.
When in operation, you should never risk losing more than 5 to 8% (absolute maximum) of your account equity in one operation. That is, if your account is $ 25,000.00 and your margin is $ 500.00 per lot, does not suit you trade more than $ 2500.00 (10% of account equity) or 5 batches.
This means you can have 5 lots of $ / JPY and have your stop / loss set at 35 points. If the transaction is against you and you were arrested, lose approximately $ 1662.00 (6.6% of capital) if the rate per pip off $ 9.50. This would meet the criteria of the above guidelines.
Operate with this formula in place will avoid risk too much in one operation and thereby protect your capital and keep it active. It is essential to have a good system, but if you have nothing with which to trade, makes no sense.
There is no system or trader in the world that does not have losses.
Operators 'professional' and profitable are right only 50% of the time but are highly profitable. This is possible thanks to strict money management and avoid excessive risk.
Proper money management must address three things: Risk and reward and overall system efficiency (as opposed to a trade efficiency, ie stop loss protection).
Money management is something that belongs to your margin account as a whole and not calculated according to the trade.
Contrary to popular belief, futures trading is not gambling. For example the risk in a casino, is artificially manufactured and designed for the house. In the futures markets we are dealing with the natural risk associated with the production and consumption of materials that make life possible and valuable: food, metals, finance and energy products.
The trader decides what will trade based on a subsequent test system values
or products that want to trade. Then you have a positive expectation based on this historic test.
We can not break those risks to our will, but we do have tools to manage them. Unlike the game, I think we can move the odds in our favor. To do this we must be disciplined and have a predetermined
plan. Read more . . . There are other methods of money management and are grouped into some categories.
Money management formula Larry Williams
Money management formula Larry Williams: (account balance * percent risk) / = larger contracts or shares for trading loss.
Larry said: "There are probably better and more sophisticated approaches, but for ordinary operators like us, not blessed with a deep understanding of mathematics, this is the best I know The beauty of this is that you can adapt to your personality risk. / reward If you Tommy Timid, uses 5 percent of your bank, if you think you're Norma Normal, use 10 to 12 percent;. if leveraged Larry, use 15 percent to 18 percent, and if you Sam is Swashbuckling or Dangerous Danielle, use more than 20% of your account ... and go to church regularly.
I've made millions of dollars with this approach. What else can I tell you? I just handed the keys of the kingdom of speculative wealth.
