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Position management methods how to get rid of the strange circle of small gains and big losses The two money management models have amazing results

2023/2/25 21:08:14  Classification:   Participation: 5  

In practice, I often hear many traders compla rebateinforextrading that they always make small profits best forex rebate big losses, even after learning a lot of fundamental and technical tools analys rebatesinforex, but also never achieve profit, the crux of which mainly lies in the bestforexrebate management big problem as described in "The Road to Financial Freedom", in fact, the main look at trading is not technology, but money management and mindset money management, is the art of defense. A defensive art, to ensure that you first invincible and then on the way to victory money management rebatemeaninginforexs are many, including cashback forex and flexible lots, fixed funds, fixed risk ratio, fixed volatility money management, etc. This article focuses on the most popular three: fixed, flexible lot model and fixed risk ratio model fixed and flexible lot fixed lot position management model can be said to be As the name implies, fixed lot size means that the number of lots for each trade is fixed, that is, you define an opening lot size, regardless of how much money is available, and regardless of whether the account is growing or losing money, the number of lots for each trade must be the same. Of course, if your account has reached the critical point, you can also choose to modify the number of lots traded, after all, there are not many bullets, you may not even be able to afford to buy two lots of contracts. But there are two problems: when the account capital is constantly decreasing, each transaction still maintains a set number of lots may increase the magnitude of losses, or even lead to a burst position; and each profit and loss is equivalent to the magnitude of each retraction may lead to the trader back to all the previous profits, back to the liberation overnight, the capital curve growth is quite slow due to the above-mentioned problems, in practice, you can take the flexible lot size model Flexible lot size means that the number of lots opened is calculated based on the total amount of money in the account, when the more money in the account, the more lots will be opened, and vice versa. This model has some risk, but when faced with a low loss period, the money will not disappear quickly, and when faced with a high market, the maximum possible return can be obtained. In practice, most traders use this money management model because it actually controls the maximum loss risk and makes traders pay attention to and keep an eye on the risk. The formula for calculating the risk (tolerable loss) is: Risk (tolerable loss) funds = available funds in the account * risk ratio (2%, 3%, etc.) Number of lots traded = risk funds / stop loss amount Note: The stop loss amount can be a fixed stop loss amount or the maximum single loss amount in historical backtesting. The number of lots will be adjusted according to the movement of the account funds, as shown in the table below (before leverage): Although the model is the same as the flexible lot size model, the number of contracts traded changes with the movement of the account funds, but the difference is that the fixed risk ratio model controls the amount of money that can afford to lose, that is, to a certain extent to control the movement of the account balance, of course, the actual balance movement and market volatility is also related to control the number of lots or risk Ratio? Which one works best in practice? Almost every money management model has its own advantages and disadvantages, and there is no absolute good or bad This article summarizes the above three more popular models, as shown in the table below From the growth of the capital curve, the number of fixed lots grows too slowly, and the number of flexible lots is better, taking into account the changes in the capital account and market volatility, but both ignore the differences in risk between different trading varieties fixed risk model has the advantage of This paper borrows the historical backtesting software Signalator to test the capital movements of different portfolios under the flexible lot size and fixed-risk ratio models, and selects only three portfolios: gold and foreign exchange portfolio, gold single species, and pure foreign exchange portfolio, setting the initial capital at $5,000 and the condition of fixed Risk ratio of 2%, or 0.1 lot for every $2000 increase in the account, as shown in the table below: the above three combinations have one thing in common: in the case of comparable levels of maximum retracement, the profitability of the flexible lot model is better than that of the fixed risk model, the percentage of profitability of the former in combination 1 and combination 3 is almost twice that of the latter, and the curve of the flexible lot model is more volatile in terms of money curve In other words, from the point of view of continuous and stable profitability and security, the fixed risk model is more advantageous. In general, all three have their advantages and disadvantages, and the trader must study the fluctuation pattern of the capital curve of the account under different models after several back tests, so as to choose the most suitable position management model for his system. When testing and selecting a money management model, you need to consider the following points: ① What type of investor are you? Are you an adventurous or conservative investor? A small retail investor or a large money manager? ②There are three indicators to consider when backtesting: total profit, maximum retracement level and the growth rate of the capital curve Some people like to grow their capital quickly, while others like to increase it slowly and steadily ③The trading strategies and trading systems you plan to use in the long term, and the money management model must match your strategies and systems

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