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Thread: Deposit Management and Capital Management

  1. #1
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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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  2. #501
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    Quote Originally Posted by cozard007 View Post
    Well, big capital is an opportunity, but the trader would have to have a winning ways to make it help himself. Forex traders can not directly rely on the big capital, they need to rely on their trading expertise and they will use the right management and disciplinary rules of trading to make it work for themselves in the market.
    Indeed actually trader's to learn at first that's why the value of their money is not very important than their trading learning. As we know that so many trader's have big money in trading accounts but they are still struggling since many year's in forex, which show that big money is not helpful in forex if you don't have the right kind of trading skill, knowledge, and learning and practice in account.

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  3. #502
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    Quote Originally Posted by forexlearner View Post
    Indeed actually trader's to learn at first that's why the value of their money is not very important than their trading learning. As we know that so many trader's have big money in trading accounts but they are still struggling since many year's in forex, which show that big money is not helpful in forex if you don't have the right kind of trading skill, knowledge, and learning and practice in account.
    Of course this is true that learning is better than earning but in real trader's not want to grant this in trading, they are trying in real trading account since the starting and they are learning in the other way which is very costly and time confusming for them. The proper use of demo is good for trader's, with the help of it they can save both for their future. Frankly speaking I had a same experience like this in past, and I lost big due to it

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  4. #503
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    Most of the times when we feel emotional when trading and we wouldn't want to loss our money while we keep on losing. The things that leads to that loss is because some of the times we have what is called poor money management, therefore we invested the amount of money that we can not afford losing. It is wrong and needs correction.

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  5. #504
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    Quote Originally Posted by splash View Post
    Most of the times when we feel emotional when trading and we wouldn't want to loss our money while we keep on losing. The things that leads to that loss is because some of the times we have what is called poor money management, therefore we invested the amount of money that we can not afford losing. It is wrong and needs correction.
    Emotional trading is the way to losses. We can succeed only when we have got the right trading mindset and good psychology. Most of it is about avoiding emotions. We cannot chose our lot size blindly or simply open the biggest lot size possible. Our lot size should be determined by careful thinking and keeping in view the risk that comes along. Money management and risk management are always vital in Forex trading.

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  6. #505
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    Quote Originally Posted by PROPENSITY100 View Post
    Emotional trading is the way to losses. We can succeed only when we have got the right trading mindset and good psychology. Most of it is about avoiding emotions. We cannot chose our lot size blindly or simply open the biggest lot size possible. Our lot size should be determined by careful thinking and keeping in view the risk that comes along. Money management and risk management are always vital in Forex trading.
    I believe you sir, traders do not have to be emotional in any of their dealing in the market. Because, even if the trader has the best trading skills and system in the forex market, the bad psychology of the trader will not allow their beauty to be shown, unless the trader conquers that, nothing meaningful would come out of his trading.

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    Quote Originally Posted by PROPENSITY100 View Post
    Emotional trading is the way to losses. We can succeed only when we have got the right trading mindset and good psychology. Most of it is about avoiding emotions. We cannot chose our lot size blindly or simply open the biggest lot size possible. Our lot size should be determined by careful thinking and keeping in view the risk that comes along. Money management and risk management are always vital in Forex trading.
    That is the work of discipline because we will be needing to be disciplined if we would expect to make success from the business. The rules to become successful is applicable when we should have the discipline to have it work. The deposit management is really important thus would help us to invest the amount of money that we can afford losing and would assist on us using risk management.

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  8. #507
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    As we all knows that forex is risky and tough business and we shoudl trade with proper management, deposit management and capital management play the key role.

    We have to do careful trading and should make the proper planning after good deposit management in order to get the fruitful result from this business.

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  9. #508
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    Quote Originally Posted by splash View Post
    That is the work of discipline because we will be needing to be disciplined if we would expect to make success from the business. The rules to become successful is applicable when we should have the discipline to have it work. The deposit management is really important thus would help us to invest the amount of money that we can afford losing and would assist on us using risk management.
    Discipline is very needed to trade safe and earn with trading. Trading depends on how we earn and how we protect our money.Using stop loss and exit target is still fine and it will depend on the trading strategy that you developed in my case I'm using stop loss or exit target because by doing that I get good results.

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    Quote Originally Posted by SuccessfulKartik View Post
    Discipline is very needed to trade safe and earn with trading. Trading depends on how we earn and how we protect our money.Using stop loss and exit target is still fine and it will depend on the trading strategy that you developed in my case I'm using stop loss or exit target because by doing that I get good results.
    yes, trading is not about the making of trades only, the trader have to know what they do in the business and do it to give them the money they want. when there is safety of trading, traders will make stable money, and the risk and money management can be the help in this.

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  11. #510
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    Quote Originally Posted by Nova View Post
    As we all knows that forex is risky and tough business and we shoudl trade with proper management, deposit management and capital management play the key role.

    We have to do careful trading and should make the proper planning after good deposit management in order to get the fruitful result from this business.
    Of course, this is the business which is tough, risky and might be unpleasant at times. And it is the market that could give you undefinable benefits as well, so, it is at the best interest of forex traders to carefully plan how to trade it and make their money successfully. That is mainly in the way that the trader is working with his trading system, management and plans.

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