Deposit Management and Capital Management
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  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. #2
    Trader 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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    [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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    Quote Originally Posted by samprazaan View Post
    [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]
    Yes, I think that the risk perception of the means by which one could work out to help you achieve success
    The capital management is the backbone of the Forex because they contain the most important points in this area and most of the losers and the losers in the forex their cause is a lack of respect for capital management and for me, I am I think that the most important point in managing capital is to overcome the greed which is the enemy most Forex

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    Quote Originally Posted by mohamed View Post
    Yes, I think that the risk perception of the means by which one could work out to help you achieve success
    The capital management is the backbone of the Forex because they contain the most important points in this area and most of the losers and the losers in the forex their cause is a lack of respect for capital management and for me, I am I think that the most important point in managing capital is to overcome the greed which is the enemy most Forex
    I totally disagree on greed. In forex trading we are dealing with money in here and greed is part of forex trading. This is our bible in forex trading. We want to earn money. That's why we are in here. And our dream is to earn more and more money. That's what forex trading is all about. So greed is not the problem in forex trading. Our lack of trading skills and knowledge is the problem.

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  6. #6
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    Quote Originally Posted by budado View Post
    I totally disagree on greed. In forex trading we are dealing with money in here and greed is part of forex trading. This is our bible in forex trading. We want to earn money. That's why we are in here. And our dream is to earn more and more money. That's what forex trading is all about. So greed is not the problem in forex trading. Our lack of trading skills and knowledge is the problem.
    Don't use your believes on religion in this matter, forex market is out of religion, so don't use the words of bible or any religious attachment. Greed is a natural thing and every new trader come in forex market under greedy circumstances, he thinks that he will be able to double the amount within shortest time. What is this? it is called greed.

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  7. #7
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    There is a simple formula for that you have to analyse your capital and to set a limit on it in such a way that you do not lose more than 2 or 3% of your main capital in one trade and the moment you feel like you are losing your emotions you should set a stop loss and close the screen of your laptop. This is the only way to succeed in this market. Not only to succeed but also to sustain in this market for sometime because otherwise you will end up blowing up everything.

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    Quote Originally Posted by ravian View Post
    There is a simple formula for that you have to analyse your capital and to set a limit on it in such a way that you do not lose more than 2 or 3% of your main capital in one trade and the moment you feel like you are losing your emotions you should set a stop loss and close the screen of your laptop. This is the only way to succeed in this market. Not only to succeed but also to sustain in this market for sometime because otherwise you will end up blowing up everything.
    It is a good technique to work in this market with these technique this is natural money management and if we are setting stop loss due to emotion then our stop does not work because it will be fail ,if we set the price for stop loss in advance then we are able to make good strategy to get the positive result from it .

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  9. #9
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    Quote Originally Posted by rinaji View Post
    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.
    most of the trader depend on big capital they are stuck in to it but this market not only a capital its all about logic how to move currency and why currency move its a question then you just search it if you understand this then you are a trader so never listen to rumors just focus by your self and do it what you want and increased your knowledge..

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    Quote Originally Posted by Zahida View Post
    most of the trader depend on big capital they are stuck in to it but this market not only a capital its all about logic how to move currency and why currency move its a question then you just search it if you understand this then you are a trader so never listen to rumors just focus by your self and do it what you want and increased your knowledge..
    I agree with your thought because only big capital is not a sign for success we must have own way for trade and own strategy to work with it all the time we concern with different pattern and learning so a trader give importance for learning that will help us to increase our capital .

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