Forexrazor_com
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I have been a full time trader for sometime now and I do believe one of the hardest hurdles to jump is consistently using good money management. So I thought I would take some time to give an overview on how I manage funds. I am hoping some other veteran traders will post their management rules too. This way we can get a wealth of education for new traders so they don’t go blowing up their account the way I did first learning.
The main thing about me is I like it when everything is simple. I try to keep it simple stupid. For me money management was a hard road to walk, it was paved with bad decisions and major losses. Then one day I tried something simple. I started looking at my risk in percent instead of in pips!!! All of a sudden the markets opened up to me. I could profit by scalping 5 pips or by holding longer term trades for 300 pips and everything in between. For the first time it made sense and it was simple.
So here is a simple break down of how I trade. I risk 1-3% of my account total per trade ( I recommend using 0.25% when you are still new to the markets).
Ok for this example I will be using a $10,000 account 1% risk and a 25 pip stop loss trading EUR/USD.
Here is the formula $10,000 X .01 = $100 (risk in dollars) we now have our risk in dollars so we need to spreads this out over 25 pips for our stop $100(risk in dollars) /25 (stop loss in pips) = $4 (risk per pip). Now we just take our risk per pip and divide it by the pip value of EUR/USD is $10 per lot so $4(risk per pip)/$10 (pip value of one lot)= 0.4 (trade lot size) So 1% risk using a 25 pip stop on $10,000 we would need to trade 0.4 lots or 4 mini lots. I hope this is helpful and I look forward to others posting their systems.
Good trading
The main thing about me is I like it when everything is simple. I try to keep it simple stupid. For me money management was a hard road to walk, it was paved with bad decisions and major losses. Then one day I tried something simple. I started looking at my risk in percent instead of in pips!!! All of a sudden the markets opened up to me. I could profit by scalping 5 pips or by holding longer term trades for 300 pips and everything in between. For the first time it made sense and it was simple.
So here is a simple break down of how I trade. I risk 1-3% of my account total per trade ( I recommend using 0.25% when you are still new to the markets).
Ok for this example I will be using a $10,000 account 1% risk and a 25 pip stop loss trading EUR/USD.
Here is the formula $10,000 X .01 = $100 (risk in dollars) we now have our risk in dollars so we need to spreads this out over 25 pips for our stop $100(risk in dollars) /25 (stop loss in pips) = $4 (risk per pip). Now we just take our risk per pip and divide it by the pip value of EUR/USD is $10 per lot so $4(risk per pip)/$10 (pip value of one lot)= 0.4 (trade lot size) So 1% risk using a 25 pip stop on $10,000 we would need to trade 0.4 lots or 4 mini lots. I hope this is helpful and I look forward to others posting their systems.
Good trading
