Deposit Management and Capital Management
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Thread: Deposit Management and Capital Management

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    Rookie rinaji's Avatar
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    Deposit Management and Capital Management

    Today I made ​​a light topic to discuss, about trade using a stop loss or cut loss. We have too much discussion about the importance of stop loss and risk management, it is 100% true, we must agree that the stop loss and risk management is essential to minimize the risk.

    Do you agree with this...

    No Stop Loss = No Risk Management?

    It is a simple and easy question to answer, maybe we will find many traders who agree with the above sentence.

    But ...., should not be so, money management is not only for the balance in the account, but for all of our capital, (on the account, in payment processor, in the Bank, or in your pocket, and others). At its core is the management of all of your capital.

    I've been trading with risking 100% of deposits, but I have a risk management, yes of course.

    Suppose I have a $ 1,000 capital.
    I have a trade plan with a maximum risk of 10% (of the total capital) per trade. That means I take $ 100 risk for each trade position.

    Well, in general, we will use this way ....
    We made ​​a $ 1,000 deposit. We use a stop loss or cut losses when equity was reduced by $ 100 or 10%. It is a common way. And other people will think that we are really good in applying risk management. Of course...

    So what if we do this way ...
    We split our capital into 10 deposit @ $100. We made ​​a $ 100 deposit, the remainder ($ 900) is stored in the payment processor, or bank, or our pockets. And we do the trade without a stop loss / cut loss. If we get stopped out, then we make a new deposit ($ 100), and so on.
    Perhaps some people may believe we are risking 100%, yes we understand them, because they only see from the management of deposits, not capital management.

    Conclusion: Do not think that risking 100% deposit is mean without risk management. So if you see me getting stop out (usually I trade without a stop loss), you do not think that I am risking 100% of capital. I am only risking 100% of deposits. This could mean only risking 10% of my capital, or 5% capital, because I always split the deposits into multiple parts.

    Another example:
    Suppose I have $ 1,000. and I split into 10 deposits @ $ 100. Well, if I set 10% risk (of the initial balance) per trade. Or $ 10 per trade. This means that we set 1% risk (of total capital) per trade. Equivalent to $ 10.
    10% risk of initial balance ($ 100) = 10% * $ 100 = $ 10. This is if we calculate in deposit management.
    1% risk of total capital ($ 1,000) = 1% * $ 1,000 = $ 10. This is if we calculate in capital management.

    It is a simple way to understand capital management, maybe I'll make a topic about cash flow management in the other thread. I think we should actually do forex trading as a professional business, not just about market analysis.

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    Rookie rinaji's Avatar
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    Money management is a major factor in a business, we must have skills in money management. While the beginners usually only focus on learning about market analysis, do not give attention to money management. Forex trading without money management is not a business. If we feel that we ourselves are a businessman, then the first skill we should have is money management. Because money management is a common skill for all businesses, while market analysis is a specific skill. Expert analysis is not mean expert traders. But expert trader is can possibly expert in analysis.

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    You say that you take 10% risk on your trade. It is too big for me. Deposit 100USD and taking potential loss 10USD. It mean 10% risk. Based on money manegement we can not put risk too high. Because time to recover the loss. The more bigger loss percentage per trade, making long time to recover.

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    Rinaji, i appreciate your view. It is very much critical for the trader to have proper money management being implemented in each and every trade and money involved aspect. As far as your view regarding splitting the deposit, i would say that its not mandatory that we may lose, there are reversals or pull backs also happening, in such cases there are chances that we may not have to close the trades with 10% risk. Just my view.

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    [lang=id]money management is very important, and traders need to know it, some will set percentages between the risk per trades and stop loss as the limit of them, but some traders do not like to trade with stop loss, they change it with cut loss or also hedging to lock the floating minus or positive,
    i see that you have gotten the ways to manage your capital for trading forex with split your capital into several parts acccount trading, it is good[/lang]

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    Registered user dkarev's Avatar
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    trading is a business we need to be calculative when doing this business we dont trade the market for the sake of trading,we do this business based on knowledge and understanding we are having to do this business,the kinda understanding we are having to do this business determine our success in this business,this is why we need to have a plan when trading the market.

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    I agree with you to this point, We need to maintain money management properly. Only money management is not sufficient also, we need to learn many other aspects like- time management, trading strategy, market analysis and some other important aspects of this trade. If we continue our trading with a view to learn, then we must able to see the success.

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    It is hard for me to thank a poster but I thanked this one because of the way he explained this. I love a trader that looks about trading beyond the getting of the direction, but making good trading system to secure the investments as well. I love the traders that know how to trade and get a good risk and money management in the market, that is what will save the trader at the end.

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    Quote Originally Posted by cozard007 View Post
    It is hard for me to thank a poster but I thanked this one because of the way he explained this. I love a trader that looks about trading beyond the getting of the direction, but making good trading system to secure the investments as well. I love the traders that know how to trade and get a good risk and money management in the market, that is what will save the trader at the end.
    When we want to trade in the Forex markets the main thing that comes up is the need of a good trading capital. When we have enough trading funds we can invest them and trade when their is a trading opportunity with us. We must try to risk only that much trading amount which we can loose and also which will give us more margins for the current trades

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    Rookie rinaji's Avatar
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    Quote Originally Posted by nsawork View Post
    When we want to trade in the Forex markets the main thing that comes up is the need of a good trading capital. When we have enough trading funds we can invest them and trade when their is a trading opportunity with us. We must try to risk only that much trading amount which we can loose and also which will give us more margins for the current trades
    Skills in money management is an important part of managing a business, including forex, money management is like an art, like the art in analyzing market. Our creativity in money management and cash flow management is a positive value for the survival and our existence in this business. I'm sure every trader has different ways of money management.

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