Money Management
The most successful trader is not the one that makes the most pips or has the biggest account , but the one that manages risk the best
Money Management is not one of the most talked about subjects out there , although it should be.
Do not risk more than 1% of your account for swing trades , or 2 % for day trades as you spend less time in the market day trading and there have less exposure to risk , as long as you have a correctly excecuted trading plan. I want to talk a little about stops and how to manage them:
So here goes.
10 mini lots is the position size. I rounded each pip to $10 for ease of math.
stop is 40 pips on each trade on gbpjpy to allow it room to breath
Scenario 1
If trade goes in my direction:
20 pips up I take profit 3 lots ,$60
profit
40 pips up i take profit 2nd 3 lots , $120 profit
$180 profit .. stop is paid for
Now I let my other 4 lots run. Even if the market drops on last 4 lots and stops me out I am still in profit by $20 if i keep the orignal stop at 40 pips under my entry price. Once you have paid for the stop it is easier to let the last 4 lots run.
Scenario 2:
once you have 40 pips in bank move stop to break even , last 4 lots goes down to your entry price you get stopped out but have $180 profit
Scenario 3
The market only goes to 20 pips. You have profit of $60.
last 7 lots goes
down.....you get $280 hit , but have already banked $60 profit on trade. Hit
does not seem as bad.
scenario 4
trade goes down as soon as you buy . It happens , nothing in trading is 100 %accurate. The numbers can be adjusted depending on your personal trading style and risk tolerance. By taking partial profits and moving stop up as the trade works in your favour you are managing the risk and protecting profits.
Smart Money Management
Day trading.
1) time 4:30 to 0800 hour pst
2) chart time frame 5 minutes down to 2 minutes
3) entry will be above or below the trigger bar by 'x' pips . X will vary depneing on market conditions and will be adjsuted by the room moderator.
4) stops 40 pips
5) position size no more than 2- 3% of account ( 10k account use only $200 - $300)
6) remove profits in stages as per money management article
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