Deposit Management and Capital Management - Page 9
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Thread: Deposit Management and Capital Management

  1. #1
    Trader 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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  2. #81
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    Quote Originally Posted by rinaji View Post
    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.
    It is more interesting to trade in initial balance directly 1000USD deposit than we split into ten times deposit each 100USD. Higher capital can get higher return. I recommend to join all the 10 of each 100USD in one deposit, the trade it with larger margin than trade in 100USD initial balance

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  3. #82
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    It is what you have that you will not want to lose, and you might want to make more money with it. If this is the pint you are protecting. Then you will have a good trading plans, and ways to do trading with management. If a traders does not specify a rules for his management, such traders s sill not worth welcoming to trading forex business.

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  4. #83
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    Quote Originally Posted by aris90 View Post
    It is more interesting to trade in initial balance directly 1000USD deposit than we split into ten times deposit each 100USD. Higher capital can get higher return. I recommend to join all the 10 of each 100USD in one deposit, the trade it with larger margin than trade in 100USD initial balance
    For me the formula is incomplete. I mean in term of money management. We also need to compute the leverage and the lot size and the type of trading account we have. Because its can make a big difference. If you are using lets say cent account then the 0.10 lot 1 pip is worth 1/10 of a cent. While in mini account is worth with 0.01 lot size is worth 1 cent. and in micro or lite account its worth 10 cents and standard usually worth 1 dollar per pips.

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  5. #84
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    For me, our stop loss is our best friend in trading and that too only as much as you can lose freely. Which for me is some 100th percent of your total trading capital and never more than that, when you exceed, you fail.

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  6. #85
    Trader rinaji's Avatar
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    Quote Originally Posted by ravian View Post
    For me, our stop loss is our best friend in trading and that too only as much as you can lose freely. Which for me is some 100th percent of your total trading capital and never more than that, when you exceed, you fail.
    Yea mate you're right, stop loss tool must be our best friend if we discipline in risk management, but we also can use cut loss manually or we can use hedging strategy, its up to trader itself which method will be suitable for them. This is about how to manage our capital investment in this business, we should always have the limitation of our risk.

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  7. #86
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    Quote Originally Posted by rinaji View Post
    Yea mate you're right, stop loss tool must be our best friend if we discipline in risk management, but we also can use cut loss manually or we can use hedging strategy, its up to trader itself which method will be suitable for them. This is about how to manage our capital investment in this business, we should always have the limitation of our risk.
    Risk management, assessment and limitation is very much critical for the traders success. How we manage the trade is purely dependent upon the traders market analyzing skills and the major role being played by the proper total account management such that we can excel with certainty. Capital should always appreciate over time and not depreciate in value.

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  8. #87
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    Forex trading is not a quick rich scheme and we can not make good profit without proper strategies and plans.we should know that trading is a risky field.
    That's way it is better of deposit with profit planning and targets.planning can give us continuty.

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  9. #88
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    Quote Originally Posted by rinaji View Post
    No Stop Loss = No Risk Management?
    I agree with this completely. Forex market is unpredictable and market can move abruptly for some certain facts. Using stop loss is very important for minimizing risk. But placing stop loss at wrong place may bring unwanted losses. So stop loss should be placed at a reasonable distance so that it can minimize risk perfectly.

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  10. #89
    Trader Hukam's Avatar
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    What a wonderful capital management concept thanks for sharing this that's true that if we will take risk 100 of our capital then its not matter that we are using less or high capital we are in heavily risk here proper money management help a trader to do trade with any type of investment like small and big investment

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  11. #90
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    Quote Originally Posted by Hukam View Post
    What a wonderful capital management concept thanks for sharing this that's true that if we will take risk 100 of our capital then its not matter that we are using less or high capital we are in heavily risk here proper money management help a trader to do trade with any type of investment like small and big investment
    Capital management is very much critical for all traders success. Hence, one should always make sure that they are very much sure of their capital management capacity such that they can take up the potential trades and win with certainty in the forex market. One who manages their money well will certainly make good gains.

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