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Trade
Define MM
There are several factors significantly influencing success in Forex trading.
Firstis the availability of quality trading system that is potentially profitable.
Second, is a psychological factor to be reckoned with every person.
Thirdly is money management, which determines the effectiveness of all actions taken on the market, as well as the degree of risk. Each of these factors is very important, because without stable a successful trader work almost impossible. And this article we look at what should pay attention when determining the MM (money management).
You first need to understand the dilemma that will appear to the trader.
• First, I want to earn as much as possible, with a limited cash resource.
• Second, increasing the size of the potential profit entailed an increase in risk.
Here it is necessary to seek a middle ground, or with full responsibility to decide on the extremes, for example, greatly inflating the risks. In this case, the person is aware of the probability of loss of Deposit and agrees to it for the opportunity to get more profit.
Deciding for themselves what is more important, yield or low risk in the trade, the trader goes on to define the lot used them in their work. Here there is no single recipe that would give the answer to the question, what to choose a lot, having on Deposit certain amount of money. You have to consider various factors to pick the optimal lot size taking into account characteristics of the trade, which we will hold in the market. Among the main factors are the following:
• the value of maximum subsidence for the period of testing the system
• number of currency pairs used in the work
• the maximum number of open positions at one time
• trading conditions of the broker, provided the speculator.
Determine the optimal MM
The maximum drawdown can help a person to understand what exactly have to deal with in terms of possible losses. Such testing must be conducted over a long period of time, so that the findings were significant statistical evidence.
The drawdown in this case is in points, to objectively understand the situation. The higher the drawdown, the more you will have to work with a lot, refusing its excessive increase. At the same time, reducing the volume of the transaction as well not play for the benefit of the speculator, as part of the cash Deposit will not be involved.
The number of tools used in the work, as well as the number of transactions that can be open at the same time, also affect the lot size. The higher these numbers, the smaller should be the value of each position. Agree that different levels of risk will in that case, if you open one trade of 1 lot and 3 trade one lot.
Thus, in the second embodiment, when the market may be up to 3 items at the same time, it is desirable to volume reduce three times. So, even if at the same time, will be involved in all transactions, the risk will not exceed the same parameter in the trade of one item.
The trading conditions of the broker can also act as constraints. Here you can pay attention on is the leverage, Stop out level and other parameters of accounts. It is possible that when using some types of trading systems, this information will be very important for the speculator.
In most cases, if the risks in the work apply moderate, leverage, Stop Out and so on will not affect the trading process. Identify with MM, it should be understood that the choice of money management depends on the efficiency of use of funds, as well as their safety.
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| Category: Forex | Added by: (05.11.2017)
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| Views: 355
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