Money Management - The Holy Grail Of Trading
Money management determines how much to risk on each
individual trade. This is a vital element of any trading system -
risk too much and the chances of going bust are too high, risk
too little and the reward for trading is too low.
The main methods for calculating trade size are:
The number of contracts to trade is determined by a fixed
percentage of current equity. As only whole futures contracts can
be trade this, effectively, means that the trader uses 1 contract
per $x of equity. For example 1 contract per $10,000.
Fixed fractional, however, requires unequal achievement at
different contract levels. For 1 contract every $10,000 to move
from 1 contract to 2 requires a profit of $10,000 from 1
contract. To move from 10 contracts to 11 still requires $10,000
profit but from 10 contracts. So for smaller account sizes it
will take a long time for the money management to actually kick
in and for larger account sizes the number of contracts traded
will jump wildly around.
Using fixed fractional the number of contracts traded would be
calculated as equity/x, where x=dollars per contract ($10,000 in
the above example).
Contracts - Equity Required $
1 - 10,000
2 - 20,000
3 - 30,000
4 - 40,000
5 - 50,000
6 - 60,000
Fixed ratio adds a variable to the fixed fractional
Fixed ratio adds delta to the calculation. The delta is a
factor which is required to move to the next contract level. The
lower the delta the more aggressive the money management is.
The formula is:
equity required to trade previous contract size + (number of
contracts x delta) = Next level.
Eg starting with a base of $10,000 for 1 contract and a delta
Contracts - Equity Required $
1 - 10,000
2 - 15,000
3 - 25,000
4 - 40,000
5 - 60,000
6 - 85,000
Comparing the above table to that for fixed fractional it can
be seen that at the lower account levels less equity is required
whereas as the account grows the number of contracts traded
becomes less aggressive.
Tim Wreford runs Online Futures
Trading, a website that provides information and resources
for traders. Tim also provides a free
day trading system, the results of which are updated daily on
MORE RESOURCES updated Mon. December / 11 / 2023
The Secret of Reduced
One of the best kept secrets in trading is that of reduced
margin spreads. You cannot name a trading method that
provides more safety or a greater return on margin than
does a reduced margin spread, while also being one of the
least time- consuming ways to trade.
The Meaning of FOREX
Price Charts and How to Use Them
There is one very important factor that you should consider
with great care if you are willing to become a successful,
profitable Forex trader. This ever important factor that
must be always present in the trader's portfolio, is the
ability to read the charts.
A Fools Game
I received an email this week with a question (below) which
caused me to think about the wisdom of pursuing trading as
a career. Regardless of your trading time span, the skills
and concerns of active short-term trading are relevant to
all market particpipants.
How Do Other Countries
Devalue Their Currencies?
Countries devalue their currencies only when they have no
other way to correct past economic mistakes - whether their
own or mistakes committed by their predecessors. The ills of
a devaluation are still at least equal to its advantages.
Internet and Computer
Systems in the FOREX Business
With every passing year the interest in electronic trading
is bigger, more especially trading shares and currency
through Internet. A new profession came forward - this of
the currency dealer.
A Look at Forex Market
The investor in the currency market takes for granted that
a pair of currencies can be bought or sold at a moment's
notice. Once an order is placed with a broker, the trade is
executed within seconds.
Chinas New Currency
The base unit for the renminbi is the yuan, which is how
the Chinese currency is most commonly referred to. The
official ISO abbreviation for the yuan is CNY, but it is
also commonly abbreviated in the forex industry as RMB.
Risk and Stock Trading
Fees: The Two Barriers To Overcome If You Want A Successful
You know the old joke:" How do you make a million in the
stock market? Start with two million?" There is no way
around it, risk and stock market fees are a part of trading
that you can't avoid. But, you can manage your risk.
The following situation happens quite often to many
traders. Look it over and see if it has been happening to
you: You have been faithfully following your trading plan
and the rules you've set for trading.
The Basics of
Foreign exchange market is also known as Forex or FX
market. To date, it is the world's biggest "economic
Commodity Trading -
Advantages and Disadvantages
What Is Commodity Trading? Commodity futures markets allow
commercial producers and commercial consumers to offset the
risk of adverse future price movements in the commodities
that they are selling or buying. In order to work a futures
contract must be standardized.
The Forex Market-What, When and Why?Forex, FX and the Forex
market are some common abbreviations for the Foreign
Exchange market. Actually it is the largest financial
market in the world, where money is sold and bought freely.
Money Management, Part
FEARING LOSSESThere is a huge difference between being risk
averse and fearing losses. You must hate to lose.
Foreign exchange market, or better known as FOREX, is the
world's largest and most prolific financial exchange market
originated on 1973. Bearing the status of largest and most
prolific currency exchange market, FOREX is the center
stage where a vast majority of the currency trading or
FOREX trading takes place, with a total daily turnover of
currency worth more than $1.
Trade Exit - How To Cut
Losses And Let Profits Run
Cut your losses short and let your profits run. This is the
essence of your trade exit rules.
Forex Trading Online - 7
Reasons Why You Should!
Forex trading online is a fast way to use your investment
capital to it's fullest. The Forex markets offer distinct
advantages to the small and large traders alike, making
Forex currency trading in many ways preferable to other
markets such as stocks, options or traditional futures.
Forex Brokers - Helping
to Maximize Your Success
A Forex broker is a broker dealing in foreign exchange,
just like real estate broker who deals in real estate and
properties. Simply, a Forex broker is an advisor who
advises you about the forex market.
Types of Foreign
Currency Hedging Vehicles
The following are some of the most common types of foreign
currency hedging vehicles used in today's markets as a
foreign currency hedge. While retail forex traders
typically use foreign currency options as a hedging
The Secrets of the
The first and perhaps most important "secret" is to realize
that your methodology or approach (no matter how good) is
only part of being a highly successful trader. This applies
to any trading style including, day trading, swing trading
or position trading.
Crisis of Confidence in
The European Union (EU) constitution was dealt a double
blow, first by a French "no" vote on 29-May and then by a
follow on "no" from the Netherlands on 01-Jun. To add
insult to injury, one low level Italian diplomat quickly
called for a referendum in Italy to decide if a return to
the lira was warranted.
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