August
12
23:20
Brainstorm

Capital Management


There is a huge amount of money management techniques when trading on Forex.Foolish "double the lot is not recoup" to abstruse theories based on the binomial distribution.

Personally, I use a fairly simple way, and which going to tell.

order to eliminate misunderstanding, I will mention at once that all the calculations are carried out in the text of the old points.

So, here is the algorithm of actions for my method of money management:

1. determine which strategy or advisor will trade.

2. conduct tests on history.

  • If Adviser, runs in the strategy tester with 0.1 lot.If you want to trade by several experts sovemestite results in the Report Manager software.What we are interested in the report on testing with a constant 0.1 lot, this is the level Maximum drawdown dollar.Becausewhen the item 0.1 1punkt ≈ 1 $, then our level of drawdown of $ 0.1 when the item will be approximately equal to the level of drawdown in pips.
  • If it is a strategy for manual trading, spend "paper" transactions
    in the graphs for past periods, or use special strategies for programammi tests such SimpleForexTester.Test should be, as in the case of advisers with a constant 0.1 lot.We are again interested in the level of Maximum drawdown .

3. Knowing the level of the maximum drawdown in pips for the strategy on history, we can calculate our risk.But first, the resulting figure drawdown in paragraphs is increased by 20 percent - in the event of error in the calculations, force majeure etc.This forex trading, there is never a 100% certainty ...

4. Next, determine what the minimum allowable lot size trade on your account, and how much it costs 1 point of price movement in trading thereby minimum lot.

Suppose you have a micro -account minutes.lot 0.01 and 1 point ≈ 0,1 $.

also say that earlier, during the test on the history, you have calculated the drawdown on your system and it does not exceed 80 punktov.Vy added another 20 points for emergencies and were drawdowns possible level of 100 points.

5. Now decide what part of the deposit if you are willing to lose drawdown.Part of the deposit as a percentage.Let's say for you comfortable level drawdown 30% of the deposit, and the more you do not want to lose.OK.

6. Finally proceed to the final stage.

We know that the drawdown of the strategy is 100 points on our account min.lot 0.01, 1 point ≈ 0.1 $ when trading min.lot, and we agree on the drawdown of 30% of the deposit.

First calculate the minimum required deposit.

100 points (our maximum drawdown) under item 0.01 will cost $ 10.

Our comfortable level of 30% of losses.If the drawdown during min.the lot will be $ 10, then we take the 10 $ as 30% and calculate 100%

$ 10 = 30%

100% = $ 33.3, which can be rounded to $ 35.

So, $ 35 - it minimlny deposit to trade this strategy on our type of account with min.item 0.01.

«And if I want to make a much larger deposit?" - You ask.No problem.We will use 0.01 lots for every $ 35 depots.Or 0.1 lots per $ 350 balance for larger sums.

«How to be, if the trade balance increases / decreases?»

Yes as well.We are trading 0.01 lots for every $ 35 in the account.For example, our balance was $ 70, we traded 0.02 lot (70: 35 = 2), made a profit and the account balance became $ 110.110: 35 = 3 (rounded to the nearest downwards).So now with the balance of $ 110, we will put a lot 0.03.If suddenly our expense reduced to $ 100, we will deliver the item again 0.02.

This is very important.

Do not increase a lot, if your score is reduced !!!

These uncomplicated calculations, we determined which will raise the trading lot as it will zoom in and out.

Just substitute your number instead of the above as an example.


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