Hello all traders,
For a long time people told me that money management is fondamental , i agree , but often is very difficult discover and understand the reason.
Is it possible to convert a losing strategy into a winning strategy thanks to the money management?
I want to try to give an example:
10 trade = 4 winner 6 loser, with R:R 1: 1 ...
This is a losing strategy as you can see!
Some maths :
Assuming that every trade cost us 10 euro and the total money to risk is 100 euro we will have 80 euro( 4 winning trade * 10) and -60(losing trade)
What happen if i change the money to risk for each position?
1 trade (LOSE) stake =9.9 euro
2 trade (WIN) stake =13.2 total =103.3
3 trade(Lose ) stake = 9.9
4 trade (Win) stake = 14.15 total = 107.54
5 trade(win) stake = 9.43
6 trade(Lose ) stake =3.77
7 trade(WIN) stake =7.54 totale =120 euro .... 20 % ROI with 4 winner trades and 6 loser trades while in the classical money management we'll lose.
8 trade
9 trade
10 trade
http://gyazo.com/6ca34e879c647f747f3693d67dcd3625
This is not Martingale !
OK, now i want to say sorry because i know my english is very very bad and it will be not easy for you understand what i wanna say...
WE JUST NEED TO KNOW WHAT IS OUR r:r AND % OF WINNING TRADES AND WE CAN kNOw BEFORE WHAT WILL BE OUR ROI.
We just care that 4 trades /10 will be winner.
Some condition:
Every trade must to be consecutives, we need to know if every trade lose or win before to calculate the next lot size, i used this strategy in the betting world and it's work, in the forex you have to add spread, commission, and the margin.
Until now i talked using the word "money to risk", before to apply the strategy you will need some money extra only for the margin, so if the money to risk is 100 euro, you will need at least other 200 euro for the margin but not to risk.
If there are enough people interested to this,in the next step will be explained how to calculate every stake.
Another examples
Money to risk =100
trades =30
winning trade: 3
R:R 1 : 6
ROI = 1.34
usually a risk 5 pips to earn 30 pips...and with only 3 trades i earn 34%.
For a long time people told me that money management is fondamental , i agree , but often is very difficult discover and understand the reason.
Is it possible to convert a losing strategy into a winning strategy thanks to the money management?
I want to try to give an example:
10 trade = 4 winner 6 loser, with R:R 1: 1 ...
This is a losing strategy as you can see!
Some maths :
Assuming that every trade cost us 10 euro and the total money to risk is 100 euro we will have 80 euro( 4 winning trade * 10) and -60(losing trade)
What happen if i change the money to risk for each position?
1 trade (LOSE) stake =9.9 euro
2 trade (WIN) stake =13.2 total =103.3
3 trade(Lose ) stake = 9.9
4 trade (Win) stake = 14.15 total = 107.54
5 trade(win) stake = 9.43
6 trade(Lose ) stake =3.77
7 trade(WIN) stake =7.54 totale =120 euro .... 20 % ROI with 4 winner trades and 6 loser trades while in the classical money management we'll lose.
8 trade
9 trade
10 trade
http://gyazo.com/6ca34e879c647f747f3693d67dcd3625
This is not Martingale !
OK, now i want to say sorry because i know my english is very very bad and it will be not easy for you understand what i wanna say...
WE JUST NEED TO KNOW WHAT IS OUR r:r AND % OF WINNING TRADES AND WE CAN kNOw BEFORE WHAT WILL BE OUR ROI.
We just care that 4 trades /10 will be winner.
Some condition:
Every trade must to be consecutives, we need to know if every trade lose or win before to calculate the next lot size, i used this strategy in the betting world and it's work, in the forex you have to add spread, commission, and the margin.
Until now i talked using the word "money to risk", before to apply the strategy you will need some money extra only for the margin, so if the money to risk is 100 euro, you will need at least other 200 euro for the margin but not to risk.
If there are enough people interested to this,in the next step will be explained how to calculate every stake.
Another examples
Money to risk =100
trades =30
winning trade: 3
R:R 1 : 6
ROI = 1.34
usually a risk 5 pips to earn 30 pips...and with only 3 trades i earn 34%.