My point of view for money management

[Stevenfx]

I have a clear protocol for money management, which I follow without asking questions. Any trader needs some kind of money management system that he can follow blindly, because we cannot take decisions when we are in a live position. We cannot take it emotionally. So what I do is very simple: I work with partial sizes: I take profit when the currency gain the same distance to the stop loss level (1:1), the rest I will follow until I reach the target I set before I opened the position. Same for cutting losses- I have a clear stop loss level but I never get there with full position- I cut half of the position half way to the stop loss level. This is how I work, easy and simple to implement. Has its pros and cons but works great for me…

[TheLastBear]

Originally Posted by Stevenfx

I have a clear protocol for money management, which I follow without asking questions. Any trader needs some kind of money management system that he can follow blindly, because we cannot take decisions when we are in a live position. We cannot take it emotionally. So what I do is very simple: I work with partial sizes: I take profit when the currency gain the same distance to the stop loss level (1:1), the rest I will follow until I reach the target I set before I opened the position. Same for cutting losses- I have a clear stop loss level but I never get there with full position- I cut half of the position half way to the stop loss level. This is how I work, easy and simple to implement. Has its pros and cons but works great for me…

Trading is emotionless and it is very important to stick to those S/L set before entering a trade. Glad to hear that you stick with your money management strategy.

[Enivid]

Yes, Steven, I think you are right. I have noticed that the more parts of my trading process are predetermined and fixed before the trading signal arises the better my overall performance is.

[PaladinFX]

I concur.

Once you have developed a trading plan, you should stick to it, even if some trades get stopped-out.
Fiddling with T/P and S/L levels of an open trade makes no sense ... how will you know if the trading plan you have worked so hard to formulate is valid and will bring you long-term gains, if you keep changing the parameters of single trades?

It's way better to let the trades run and then, if a pre-determined maximum drawdown (maybe 15-20% of account balance) has been reached, to think about changing the trading plan itself ... well, at least those aspects of the plan which don't seem to work out as you've planned them to.


Cheers,
P.

[hayseed]

Originally Posted by PaladinFX

Fiddling with T/P and S/L levels of an open trade makes no sense ....

//----

would trailing stops of the various popular kinds be considered fiddling.....h

[PaladinFX]

haha, no, of course not.

What I primarily referred to was widening stops to avoid being stopped-out.
An amazing number of people do this regularly ... which makes one wonder why they bother placing stops at all.

In my opinion, the only time one really shouldn't change anything about T/P and S/L (in this case including setting a trailing stop) is in the very early stages of system evaluation.
Here, you really want to know if your S/L will be triggered or not.
But since this is being done on a demo account anyway, being stopped-out won't hurt.

Once one has decided that a trading system is valid, trailing stops are a valuable tool.


Cheers,
P.

[Maria08]

Strict money management and risk control is essential to achieve long-term success in the forex market. The high level of leverage available to Forex traders makes it important to manage risk exposure and to avoid overleveraged positions. Successful forex money management aims foremost at the preservation of initial trading capital.