Topic: How much do we know about Money management? - page 2. (Read 1858 times)

Your wish is my command.

Leverage = double edged sword.

Used properly, complete understanding of how it works, it will help a trader make enough money to support himself.
There are very few traders(Pro/full-time) who can trade without using leverage, it just doesn't pay the bills to not use it.

Example:

Scenario 1: No Leverage

Buy 100 BTC

No Leverage = 100 x 500 USD (assumption) = 50,000 USD

SL: 490

Target: 525 USD

Holding Time: Till stopped out, No time limit.

Lets assume target is hit in 1 year (Assumption for simplicity)

Profit = 25 x 100 = 2500 USD

Profit/Day = 2500/365 = 6.84 USD

Scenario 2: Optimum Leverage

Buy 100 BTC

1:5 Leverage = 100 x 500/5 = 10,000 USD

SL: 490

Target: 525 USD

Holding time: TP or SL.

Assuming target hits in 1 year. Intermediate requirement fund: Assuming your broker offers 1:50 Leverage, not required.

Profit:
i) 100 x 25 = 2500 USD

ii) 40,000 x 2.5/100 = 1000 USD   (Assumed a percentage on fixed deposits or similar, 1 year no compound)

Total Profit/Day: 9.58 USD

%age terms Profit/Day: ?

I haven't done the calculation of SL hit on trade. If one were to calculate that, it shows another dimension. Flip it further and you realise that your willingness to lose 100 x 10 = 1000 USD could have been doubled if confidence of position was higher and leverage was used.

But leverage is complicated and this doesn't even scratch the surface. I don't think I understand it completely either.

I remember something I heard:

"An average trader gets paid on winning trades, the legendary get paid to take positions" - can't remember

what I use for MT4 is this: http://www.forexfactory.com/showthread.php?t=281772
just drag the line at your stop level and it will calculate the position size acording to what you chose.
unfortunatly we have few options to trade BTC with MT4

what i do for the risk/reward per each trade is that i look at the prices and the history of the price in short and long term and then decide how long i am going to hold that investment and even in volatility there are still a max and min price that you can put for yourself as your stop loss and profit aim.


i don't like leverage and don't use it either.


please do chime in

But no need to search it in online how to manage money. I think the best way is to control your self that do not buy if not important . And right op invest it trading and manage it easily so that you can not lose everything your money. Because trading is for a risk takers it like gambling.

There are many money management techniques online, you can easily follow that as they give more detailed way on how to manage your money, my advise is that when you are investment or trading, only manage the amount of money that you can afford to lose.

Just realised this is the wrong sub-forum for this discussion.

I was looking at it from a speculative trading perspective. The profit from rise/fall of prices.

My apologies.

Request mods to move the thread.

Thanks

i make trading with only half or less bitcoin in my wallet and i still have the rest of bitcoin in my wallet because if something happen like the rate is going down, i still have bitcoin to make an order to another coins that maybe can give me profit. i still make analysis for the coins that have potential to increase on rate so i will not use my bitcoin with no clue at all.

Thats very true.  Never(subjective*) cut a winning/profitable trade.(Revision at the bottom)

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*Subjective, an example scenario where it doesn't work:

1- Range bound trading.

Price goes from 630-1 USD down to 590 USD and bounces.

Strategy: Buy at 591, SL: 589.6.

Entry: Only if price goes to 590 and comes back to 591.  (Its counter-intuitive, I can explain the reasoning behind it)

Trade goes in the predicted direction. Reaches 630.

Now do we close the trade or let it run. Or just change the SL. If yes to SL change, what is the new SL?

I would close it. Simply because I would want to keep a SL of say 625, Thats 5 USD of profits I am ready to give back to the market.

Wait for breakout. i.e. cross above 631, take the trade again and SL is now say 629. WQhich is 3 less than what  I would have given back to the market if it reversed.

Haven't considered whether I would switch the trade at the 630 point, lets consider it:

Entry: Price goes to 630 and reverses to 628(depends), Enter short SL: 631.3

Can the price trigger both trades? Yes, but calculate the potential profit from both trades and it doesn't make sense to hold the position.

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Never cut a winning/profitable trade in a trending market. Trends cannot be predicted hence open targets with SL changes when possible/rational.

I don't like risk/reward. let the trade run when it's on the good side.
I calculate my risk from the stoploss

If I missed your post and you would like me to chime in. Please bump and I will respond to your last post here.

I don't have a special money management, but I'm only trying for making my simple management with making accountant for every money is get a spending or receiving.
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Thats a perfect start.

May I suggest keeping a journal of your trades and analyzing, losses and winners.

This is for everyone:

Always keep a journal of trades, with the reasons for you entering a trade. If you can't list reasons before opening a trade, leave it. Trading opportunities are a dime a dozen.

Spend atleast 2 hours(depends on number of trades) on your journal analyzing the good and bad trades and the possible reasons will be crystal clear.

Couldn't agree more.


For serious traders(Investors can be classed differently): Always pay yourself for your time and energy, set an amount to take out. Build a nestegg.


I don't know about this part, frankly its a myth. Pro traders always have a safety net, capital protection is the number 1 rule.
Look for low risk, high return scenarios. Even then safety net.

Example:

Breakout Trading

Oversimplification, but its an example.

Need some more information. What is the usual stop, how much does it take out of your capital if 5 consecutive trades are stopped out.

Do you have an excel sheet which tells you before going in to a trade the loss and potential gain? What is the risk reward on trades? Short-term trades? Long-term trades?


If the excel sheet is not present, make it.

I am disregarding the only 5% of capital/investment as there is always human error unless algo with rules.

Leverage is a double edged sword. 1:100 is HUGE leverage.

In Forex we would call it suicidal. Why? Because unless your trading is 100% algo, with iron clad MM rules human error will come in and 1 trade will be the end of the account(doesn't matter if in 10 previous human error trades there was a profit). Irrespective of account size.

Example:

The entire Lehman Bro's. saga was at leverage 1:10(Simplifying).

I am ofcourse simplfying here. But its just an example.

I plan management money in trading before i do trading, are like how much the profit will be taken, how much  i have to do cut lost if the price going down and when i have to entry and exit in the markets and usualy i traded altcoins and i didn't using leverage and i didn't trading except altcoins.

I don’t have much experience about money management but I do it at my own levels. The very first thing is to make sure funds are diversified no matter invested or not. One should make parts of his funds keep it secure and then investing those parts in various investments opportunities. Never expect returns from all investments so make sure you have additional provisions to cover any possible losses. High risk, high returns and low risk, low returns is a thumb rule so don’t just look at risks but examine the returns too.

I don't have a special money management, but I'm only trying for making my simple management with making accountant for every money is get a spending or receiving.

The first rule of money management is; Do not put everything in the same basket.

The second rule of money management is; You make your profits when you are buying, not selling.

Those are my rules.

I play the markets in a risky manner as I do marginal trading on a 2.5x leverage on altcoin markets...
I know that it takes a big heart and such investment too in order to make it to your expenses being sorted out with these things, and I always go full on this when I know that it will get me out in green...

Hey I think I do good money management.I never invest not more than 5% of my total investment.Using this strategies I gained profit last six month.I know if in case I lose my 5% I can recover it quick but lose big its very hard to recover.I used 1:100 leverage I think this best leverage ever because this leverage stop you big volume trade.thanks