The Money Management & Risk Management Strategy

The Money Management & Risk Management Strategy

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stacyleslie

Apr 26 2014, 04:15 PM

Post #1

Junior Money Maker

Group: Members
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Joined: 17-April 14
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Member No.: 486,632

The Money Management

The money management is one method of risk management that maximizes the chances of success. It features rules based on adjusting the size of positions and management of the stops that must be followed scrupulously. This technique should be known to every trader because it can redeem the mistakes of analysis, preserve capital and significantly increasing the probability of gains. The Mastery of risk is the foundation of success.

Risk Management Strategy

We should know :

Capital
Max Loss in $ or %
Pip loss = Enter deal � Stop Loss
Value/Volume/Size of a Pip

Stop Loss

Exemple-1-

Capital = $1000
Max loss in $ = $50
Pip loss = Enter deal � Stop Loss = 1.5580 � 1.5540 = 40 pip

Max loss in % = (Max loss in $ * 100%) / Capital = ($50 * 100%) / $1000 = 5%

Value of Pip = Max loss in $ / Pip loss = $50 / 40pip = $1.25

Exemple-2-
Capital = $2000
Max loss in % = 5%
Pip loss = Enter deal � Stop Loss = 1.5580 � 1.5540 = 40 pip

Max loss in $ = (5% * $2000) / 100% = $100

Value of pip = Max loss in $ / pip loss = $100 / 40pip = $2.50

Take profit

Exemple-1-

TP = 100 pip * $1.25 = $125

Exemple-2-

TP = 100 pip * $2.50 = $250

Loss = 40pip/deal
Earn = 100pip/deal

TOTAL Gain = Earn � Loss

I made 10 deals

Exemple-0-
I do waste 5 deals
I do earn 5 deals

Total Gain = ( 5 * 100 ) � (5 * 40) = 500 � 200 = 300pip

Exemple-1-
I do waste 4 deals
I do earn 6 deals

Total Gain = ( 6 * 100 ) � (4 * 40) = 600 � 160 = 440pip

Exemple-2-
I do waste 6 deals
I do earn 4 deals

Total Gain = (4 * 100) � (6 * 40) = 400 � 240 = 160pip

Exemple-3- I do waste 3 deals
I do earn 7 deals

Total Gain = (7 * 100) � (3 * 40) = 700 � 120 = 580pip

Exemple-4-
I do waste 7 deals
I do earn 3 deals

Total Gain = (3 * 100) � (7 * 40) = 300 � 280 = 20pip

I did get from those exemples that MUST use this Rule to get a good profit

EARN = (5/2 * LOSS)

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Replies(1 - 2)

Fx_Faysal	Aug 21 2014, 05:38 PM Post #2
Junior Money Maker Group: Members Posts: 90 Dream Points: 440 Experience Points: 140 Joined: 13-August 14 Member No.: 508,043	QUOTE(stacyleslie @ Apr 26 2014, 10:15 PM) The Money Management The money management is one method of risk management that maximizes the chances of success. It features rules based on adjusting the size of positions and management of the stops that must be followed scrupulously. This technique should be known to every trader because it can redeem the mistakes of analysis, preserve capital and significantly increasing the probability of gains. The Mastery of risk is the foundation of success. Risk Management Strategy We should know : Capital Max Loss in $ or % Pip loss = Enter deal � Stop Loss Value/Volume/Size of a Pip Stop Loss Exemple-1- Capital = $1000 Max loss in $ = $50 Pip loss = Enter deal � Stop Loss = 1.5580 � 1.5540 = 40 pip Max loss in % = (Max loss in $ * 100%) / Capital = ($50 * 100%) / $1000 = 5% Value of Pip = Max loss in $ / Pip loss = $50 / 40pip = $1.25 Exemple-2- Capital = $2000 Max loss in % = 5% Pip loss = Enter deal � Stop Loss = 1.5580 � 1.5540 = 40 pip Max loss in $ = (5% * $2000) / 100% = $100 Value of pip = Max loss in $ / pip loss = $100 / 40pip = $2.50 Take profit Exemple-1- TP = 100 pip * $1.25 = $125 Exemple-2- TP = 100 pip * $2.50 = $250 Loss = 40pip/deal Earn = 100pip/deal TOTAL Gain = Earn � Loss I made 10 deals Exemple-0- I do waste 5 deals I do earn 5 deals Total Gain = ( 5 * 100 ) � (5 * 40) = 500 � 200 = 300pip Exemple-1- I do waste 4 deals I do earn 6 deals Total Gain = ( 6 * 100 ) � (4 * 40) = 600 � 160 = 440pip Exemple-2- I do waste 6 deals I do earn 4 deals Total Gain = (4 * 100) � (6 * 40) = 400 � 240 = 160pip Exemple-3- I do waste 3 deals I do earn 7 deals Total Gain = (7 * 100) � (3 * 40) = 700 � 120 = 580pip Exemple-4- I do waste 7 deals I do earn 3 deals Total Gain = (3 * 100) � (7 * 40) = 300 � 280 = 20pip I did get from those exemples that MUST use this Rule to get a good profit EARN = (5/2 * LOSS) I always follow the money management very strongly. And I am also careful about risk management. Because I know high risks are always harmful for my capital. So I take maximum 2% risk by my signal trade. So never I open more then one single trade. That's why I can successful Forex trader. -------------------- This is a Default Signature Update your Signature \| Upload your Picture/Avarta Click here to Advertise on DTM \| Free Directory Listing Enjoy more benefits by upgrading your account!

marsha	Oct 28 2014, 08:37 AM Post #3
Active Money Maker Group: Members Posts: 184 Dream Points: 633 Experience Points: 238 Joined: 28-October 14 Member No.: 526,839	QUOTE(Fx_Faysal @ Aug 21 2014, 05:38 PM) I always follow the money management very strongly. And I am also careful about risk management. Because I know high risks are always harmful for my capital. So I take maximum 2% risk by my signal trade. So never I open more then one single trade. That's why I can successful Forex trader. any new traders should spare their time learning to manage their risk. but some traders would bother for such, and always rushing out with random order at their first real account which always lead to complete loss. very usefull post. this has to sticky one. -------------------- Fully Automatic System

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