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Best Money Management Strategy
Updated: Views / Replies:11,610 / 24
Created: by Nasdin94 Attachments:3

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Best Money Management Strategy

  #21 (permalink)
Trading for Fun
Singapore, Jurong West
Futures Experience: Master
Platform: Metatrader
Broker/Data: OANDA
Favorite Futures: Currency
Nasdin94's Avatar
Posts: 128 since Oct 2011
Thanks: 11 given, 110 received

New Fixed Ratio Spreadsheet

Alright, this is my spreadsheet that I've been using for the past 2 years. Enjoy, there are different lot sizes for different pairs, and I've made it more simple than to guess how much your incremental to be.

You simply put how much points you consider to be in a drawdown and insert the % of the worst drawdown you should have ( 25%)

That aside,

I see FRMM as a more "meritocratic" form of money management as your earnings are pip based. Simply put: It's easier to earn 20 pips than to earn 100 pips and likewise, it is easier to lose 10 pips than to lose 50 pips. With that said, your rewards should proportional to how much pips you can make. If it was Fixed Risk, you might make 100 pips(This is hard to get all the time) on a 50 pip stop loss and then lose all that on the next 2x 20 pip sl trades or 2x 10 pip sl trades, whereas on FR, you would have been profitable still.

FR is different, it rewards effort proportionally.

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  #22 (permalink)
Trading Apprentice
vienna + vienna/austria
Futures Experience: Master
Platform: tt
Favorite Futures: es
Posts: 5 since Jun 2014
Thanks: 0 given, 1 received

Personally I believe that your money management should be pro-cyclical, ie if you are doing well increase size, if not reduce.

It will at times be painful, specially when things are not really working, but it will guarantee your survival and that is all that counts.

When times are good you'll make money easily and without much of an effort.

Just have to be patient in the mean-time.

just my 2 cents

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  #23 (permalink)
Trading for Profit
Birmingham UK
Futures Experience: Intermediate
Platform: Meta + TradeInterceptor + FXCM
Favorite Futures: DAX ( GBPAUD if moving )
Posts: 336 since May 2014
Thanks: 7 given, 64 received

Dunno about you lot but a think a MM strategy should be a bit more indepth than your working out your $$ Risk, come on anyone can do that it's basic math's.

How about, while in a trade what do you do in set scenario's ?? :-

( think Long on all trades )

1. Price runs up 50pips very quickly........... I take this as it'll likely whip saw.
2. Price after you get in makes a new low, finds buyers.......... buy a 2nd position if SL not hit ofcourse of #1 same SL as #1 so reduced risk more profit potential.
3. Price puts in a higher low...... move SL a few pips below the new higher low.
4. Trend changes on you, look for a cheap exit and take your smaller than SL hit loss.

But I'm a daytrader, not quite a scalper kinda inbetween the 2, you can create an edge for yourself using good SL movement and averaging in on positions ( within reason, 2 positions max here ), giving yourself the chance of making 5x's your loss potential, then your account really does fly, rather than up and back down and repeat endlessly.

I'm not obsessive over my risk, different trades need different SL sizes but I don't go altering the lot size, obviously I try to keep risk to a manageable level, but not taking losses is my main focus, there just isn't enough time while daytrading to think let alone do the maths and change Lot size, bla bla bla.

I increase my lot size normally on a Tuesday ( Mondays I struggle to get back into ), as the account grows or ofcourse shrinks.

Made 6% on 1 trade today, 1% on the next, yesterday had a 3.5% loser ( blew through the SL woulda been 2% area ), happy to go out to around 5-6%, but if it feels wrong I'll take a soft exit for less than full SL generally.

You can do all the above on any TF, only your SL and pip sizes are ofcourse bigger.

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  #24 (permalink)
Trading for Fun
Futures Experience: Intermediate
Platform: Broker
Broker/Data: Broker
Favorite Futures: Futures
Posts: 100 since Feb 2011
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Can anyone help me to calculate the appropriate delta and the "rate of decrease" for a particular market?I guess that will be something really helpful and practical approach to the subject.

I trade CNX Nifty (India-NSE).

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  #25 (permalink)
Membership Temporarily Revoked
Pahang Malaysia
Futures Experience: Intermediate
Platform: None
Favorite Futures: ES
Posts: 33 since Jul 2015
Thanks: 6 given, 12 received

Fixed ratio is a very confusing thing to me.
I wonder why it talks about absolute value instead of relative (%) values.
I mean, for example if a drawdown of 10% is equivalent to 200 pips (pips in forex is also equivalent to basis points in futures, which also means %), then...
1) If our account grow larger, isn't the pip supposed to be larger too? And if the pip remain fixed at 200, doesn't that mean we are trading less or taking less risk? If that is so, then doesn't that mean you are taking huge risk at the beginning and then reduce risk as you gets more successful?
2) Since pips = basis points (different term, same meaning) and basis points = percentage (different unit of measurement, same meaning), then what's the real meaning "drawdown of 25% with drawdown of 200 pips"? Isn't that supposed to mean "drawdown of 25% with drawdown of 2%"?

Fixed ratio talks about rewarding proportionally (best explained in relative term), but it talks about absolute term, like "risking $1,000" or "risking $5,000" instead of "risking 10%".
Very confusing.

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