Come up with a little theory about money management or money management, and then see models that can be applied to our trading account. We will see the phases in which monetary management are divided, there are two main types of money management and the some main risk associated with them. Before reading further, here is an advice on monetary management to take over the concept.
Phases of monetary management
According to several authors, monetary management can be clearly distinguished three phases depending on the value of equity (Equity) of our own. These phases can be, or not consecutive but active trading account will use this strategy sooner or later.
These phases are:
• Sowing or planting phase: The account is with its initial capital and the trader is ready to perform its first operation. During sowing the benefit phase can be less than that which would be obtained without applying any monetary management. This is because as they are added to the batch or contracts trading account during this first phase that will not yet apply the positive effects of monetary management and, conversely, the adverse effects of monetary management itself is be felt, especially the negative effects of leverage asymmetric.
• Growing or growth phase: During this phase, it reveals the positive effects of monetary management while the negative effects are noted as early left become more tenuous. During this phase the account can even show operating profits with trading systems that really are not efficient trading environment since.
• Harvest or collection phase: Here is where we get the reward of our discipline, patience and rejoice where you have applied monetary management. The benefits are already safe, or at least, there is no room for losses, even if one or more transactions in negative that began in the sowing phase are assured.
Forex Money & Risk Management
This blog is about how I deal with the management of capital and the management of risk. A rule of thumb that many professional traders use the maximum risk that can go no more than 2% of the total trading capital. This is questionable because no capital is equal, but you have to change everyone’s mental boundaries. After all, you win or lose per trade. You should do this by first using support or resistance levels and price action or candlestick signal on the daily and 4 hour chart to determine a stoploss.
You should count the number of pips to the currency value at which I currently trade (usually USD, GBP or EUR) to see whether it falls within my predetermined amount at risk. Is this the case then you place the stoploss. If the amount is too high, then I could have position sizing, it means the number of positions at which the amount is within the risk amount.
During the trade, keep checking at regular intervals (usually 2x per day) how things stand. If the trend continues moving in the desired direction, secure each new candle after the stoploss to the profits. Use confirmation signals as the exponential moving averages from the Fibonacci sequence, weaker horizontal levels, pivot points or Fibonacci levels. Count every risk that smaller or smaller.
The disadvantage of this method is that sudden track changes in time can often not be absorbed, and the trade is then being stopped. This method is more relaxed at a higher time frame, because it is better exclusively on the base of daily or 4 hour trade chart.
In order to be profitable professional trader, make a profit ratio of between 60 and 70 percent. If you acted as approaches to managing a company as you walk in business risk, but as long as you get more profit than you incur costs i.e. loss.