FRMM stands for fixed ratio money management. It was introduced by Ryan Jones in the book "the Trading Game" Amazon.com: The Trading Game: Playing by the Numbers to Make Millions eBook: Ryan Jones: Kindle Store (
What's the starting capital?
It doesn't matter as long as you don't go broke. I started with $2000. I will make a separate post to explain why $2000 is possibly enough.
What's the delta?
delta = $1200 for this experiment. This is why I called aggressive in the title of this journal. It means if the account has made profit of $1200, the FRMM calls to increase the contract size to 2 lots. Next increase of contract will require additional profit of 2x$1200 = $2400, which means total profit needs to exceed $1200 + $2400 = $3600.
In general, after making total profit of:
delta + 2 x delta + 3 x delta + ... + (n-1) x delta = n(n-1) x delta / 2
FRMM calls to trade n contracts (n >= 2).
When does FRMM call to trade 5, 10 or 20 lots?
Plug in n = 5 and delta = $1200, the total profit required to trade 5 lots is $12,000.
Plug in n = 10 and delta = $1200, the total profit required to trade 10 lots is $54,000.
Plug in n = 20 and delta = $1200, the total profit required to trade 20 lots is $228,000.
You can see that the FRMM plan calls to increase contracts aggressively when the account is small and slows down the pace when the account size is getting bigger.
Why am I starting this journal now?
I am at a critical juncture. Either do it now or never. I have been battling whether to start this journal for more than a week. I completed 50 trades and have generated profit of $1,336 by trading 1 lot. So I am at the point to start trading 2 lots. But I haven't started yet.
What's the fall back plan?
I need a fall back plan. When do I fall back to 1 lot if the account lost some money. I will do some research and explain this later in a separate post.
How do I trade?
My setups are mainly based on Brooks Price Action on 5 minute chart. I do use a small tick chart to help see the details inside the 5 minute bar. I will gradually talk about how I trade as this journal moving forward.