Deposit Management and Capital Management - Page 207
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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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    there is a must in knowing the right way for the trading , noit to trade with bigger sizes , not to have adventure in the trading , not to trade with bigger targets which may be bigger than the ability of the pair to move at , this is the real meaning of the account management and the depositing management at all . so by having good effective manner we can be safe from the trading random

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  3. #2062
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    The author of the thread tells true that traders do not have to put all their money into deposit and use them to trade in forex. They can use 1/10th of their capital as initial deposit and the other money can be in bank. In this case they will feel free and can trade without stress and that means that the quality of trading will be better.

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    Quote Originally Posted by Krosneles View Post
    The author of the thread tells true that traders do not have to put all their money into deposit and use them to trade in forex. They can use 1/10th of their capital as initial deposit and the other money can be in bank. In this case they will feel free and can trade without stress and that means that the quality of trading will be better.
    Yes many of to have more money to trade often deposit the money that we should not, this is how we find ourselves in troubles later. Many beginners complain of severe losses in trading mainly for the reason that they dont properly mind their risks during trading. Following might not be the same as knowing, we might know greed is bad but fail to control greed, know the importance of risk management but fail to follow it.

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    The basic rules is making sure that the amount of money that you have invested is not too big and is not too small, but should be the amount of money that you can afford losing and then while trading, you ain't gonna be needing to take too much risks, but mostly make calculated analysis, know when to enter the market on a trade and then when to wait, knowing about all this helps you control the risks.

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    Quote Originally Posted by Real View Post
    The basic rules is making sure that the amount of money that you have invested is not too big and is not too small, but should be the amount of money that you can afford losing and then while trading, you ain't gonna be needing to take too much risks, but mostly make calculated analysis, know when to enter the market on a trade and then when to wait, knowing about all this helps you control the risks.
    Investment ratio can be considered as later thing because we must have a proper system to handle our account in demo first. once it's all proved with positive result, we can do the rest managements with our capital and deposit to match our wallet or bank account. invest only free money and if we're going to use our savings, don't exceed more than 50% of all savings. using 10% should be enough.

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    Quote Originally Posted by Rylai View Post
    Investment ratio can be considered as later thing because we must have a proper system to handle our account in demo first. once it's all proved with positive result, we can do the rest managements with our capital and deposit to match our wallet or bank account. invest only free money and if we're going to use our savings, don't exceed more than 50% of all savings. using 10% should be enough.
    Yes when we practice at demo itself we have to make sure we follow risk management and are actually able to trade with lesser drawdowns. Losing an account is very powerful and in beginning most of us have the wrong way of trading without the stop loss. So in beginning it is advisable to trade with small deposit and not invest big sums for trading until we are really good with risk management.

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    Rookie Rylai's Avatar
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    Quote Originally Posted by AmitChallenger View Post
    Yes when we practice at demo itself we have to make sure we follow risk management and are actually able to trade with lesser drawdowns. Losing an account is very powerful and in beginning most of us have the wrong way of trading without the stop loss. So in beginning it is advisable to trade with small deposit and not invest big sums for trading until we are really good with risk management.
    Lesser or even zero drawdawn for safer trade. we can get that by trading with small risk per position and focus on long term trading. the more quality of analysis we have, the bigger our profits will become and the lesser our drawdawn will be. although it costs a very long time and not really suitable for some traders, this is the best method of trading to do by following those managements we have with deposit and our capital.

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  9. #2068
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    Quote Originally Posted by Rylai View Post
    Lesser or even zero drawdawn for safer trade. we can get that by trading with small risk per position and focus on long term trading. the more quality of analysis we have, the bigger our profits will become and the lesser our drawdawn will be. although it costs a very long time and not really suitable for some traders, this is the best method of trading to do by following those managements we have with deposit and our capital.
    How can there be 0 drawdown sir? There will be some drawdown but if we manage things well we dont have drawdowns like 50% or more of our account. Stop loss is surely an important tool for managing risks and with its right usage we can accomplish our trading goals despite losing money in a part of our trades. It is a prudent way to deal in Forex, by first allocating an appropriate amount for trading.

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    Rookie ict2014's Avatar
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    Actually, forex business very calculative business so not only deposit and capital management we need to follow all management. First, we need to measure our ability and inability that determine where we are fit in demo trading or real trading. If we don't care about our inability and start live trading with inexperience mind then we cannot work according to proper management. so emotion, capital, risk and other management equally are important in our trading business to follow.

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    Quote Originally Posted by Krosneles View Post
    The author of the thread tells true that traders do not have to put all their money into deposit and use them to trade in forex. They can use 1/10th of their capital as initial deposit and the other money can be in bank. In this case they will feel free and can trade without stress and that means that the quality of trading will be better.
    Depositing all the money you need to trade with it is not the problem, the issue in whom forex traders should take care of is for the trader to apply money and risk management to the money deposited by forex traders. It is good to trade forex field with the mindset that your investment is your priority, if there is no preservation for it, the forex traders will surely fail.

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