Best Forex money management
Money Management (from English. "money management, money management, abbreviated mm) involves a set of measures aimed at increasing investment, as well as taxes and other investments. In this article, we'll cover the important concepts for each trader as Mani Forex management. You see, even using a good profitable strategy can yield significant losses if not calculate volumes of items on deposit.
Tactical money management
Tactical mm-set of rules, tools and techniques that are used in the process of solving the ongoing challenges of preserving capital.
Tactical tools Mani Forex management include:
1. the amount of lots (quantity). Thanks to the management of the lot size you can continue trading even after a long series of losses. There is a rule that says, "the lot size (taking into account the already open positions) must not exceed 5-30% of the deposit. The percentage depends on the chosen trading strategy and values of stop orders.
2. the amount of stop loss. The stop order limits the possible loss in the particular transaction. Classic size 1/3 equals StopLoss-2/3 the size of TakeProfit. In certain strategies stop orders are not used at all, and the positions are closed by hand.
Methods of tactical mm refer:
1. fixed a lot.
All trades are equal to the volume (volume), which is determined in advance by the trader. The gain or loss on the previous transactions are not taken into account-the lot is always the same.
2. fixed percentage.
Each transaction is already selected for the lot, which is a fixed percentage (fraction) of the deposit.
3. a fixed proportion (by Ryan Jones (Ryan Jones)).
Is a variation of the system with the combination fixed lots and fractions. Is used rather seldom.
4. maximum lot.
Per trade accounted for the highest volume of total deposit. It is clear that the mandatory stop orders to protect against the loss of capital. Sometimes the trader opens a lot less, to "add" when moving in the right direction.
Strategic Mani Forex management
In fact, it's long-term planning Office. Is directly related to both the investment and trading on the stock exchange. In the first case, an investor needs to make an analysis of macroeconomic indicators (inflation, dollar value, economic development trends, etc.) in doing so, the investor specifies the direction of investment, analyzing the most profitable tools.
On financial markets, instruments are various currency pairs (GBP/USD, EUR/USD , etc.), stocks, options, or precious metals (gold and silver). Investor (trader) shall determine the amount to be purchased/sold instruments, hedging and disbursement of funds (trading on a single strategy or more open accounts at one or more brokers , etc.).
As you can see, the "fastest" money management is determined by the trading position and stop orders, which ensures maximum capital growth at a given level of risk. "Slow" (strategic) over to fundamentalen reduce risks and determine the long-term strategy of the trade.
Is that a strategy that uses a fixed lot size, the long periods ensures maximum growth deposit when data values risk/volatility. With the increase in the deposit will continue to grow and the size of the lot.
In practice the effectiveness of MM can be limited by the efficiency of the VEHICLE (trading system). Money management does not determine the entry/exit points-this refers to a trading algorithm. The role of MM to reduce risk and accelerate the increase in the deposit.
Stick to your chosen mm. Make a plan to open the first deal, so you make your trade stable. Success and remember that the profitability of trade is highly dependent on your chosen broker!
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