Deposit Management and Capital Management - Page 190
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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 Sixteen's Avatar
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    If really we can be managing our capital and following the right risk management in trading, there is no limit to what we can achieve in trading. Our deposit is important for us to manage and we should realize the right measures of developing the right trade which will help our success. It's sure a risky business and we should keep on with learning and get to see that the right management is followed always. I work extra hard to build my trade and good management have been a key method of a great trade.

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    Rookie juniorpeters's Avatar
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    i agree with you using stop-loss is actually the management we talk of risking very little part of our trading account for every signal we trade,the trader that lacks this knowledge still have a long way to go in this business.risking 10% of your capital is really something else that means i just ten losing trades you will be losing all your deposit to the market why not risk 5% i think that is better and safer.

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  4. #1893
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    Quote Originally Posted by juniorpeters View Post
    its very important to trade using risk management and stoploss.i cannot see myself trading without both of this things, if we truly want to last a long time in the market this are the only way we can scale through if not our trading account will get blown out very quickly.
    Every aspect of the market trading needs traders to be prudent and always ready to manage their money and the risk. We should not be giving up cheaply to the market, because if we did, we will be losing regularly, and that will lead to frustration. Good trading strategy has to be included as well, this will encourage whatever trading plan we have.

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  5. #1894
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    Quote Originally Posted by ajagbeolegba View Post
    Every aspect of the market trading needs traders to be prudent and always ready to manage their money and the risk. We should not be giving up cheaply to the market, because if we did, we will be losing regularly, and that will lead to frustration. Good trading strategy has to be included as well, this will encourage whatever trading plan we have.
    You are right about that, also being the reason why I always try to make sure that I have what it requires before trading and making trade with good analysis. Thing is that when we can't make good trading strategy and we don't have good trading discipline no matter the amount of money invested, we will always end in losing our money.

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    Rookie Silhouette's Avatar
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    Quote Originally Posted by Makaveli View Post
    You are right about that, also being the reason why I always try to make sure that I have what it requires before trading and making trade with good analysis. Thing is that when we can't make good trading strategy and we don't have good trading discipline no matter the amount of money invested, we will always end in losing our money.
    First to notice is that trading with forex market is only safe by those who can manage everything perfectly, especially with their risk and money management. If we failed on these two things as the key, no matter what we do with our trading, the result of failure will always be cleared to see. I think deposit and capital management are included into whole package of money management, as well as to make things work accordingly to the plan.

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    Quote Originally Posted by Silhouette View Post
    First to notice is that trading with forex market is only safe by those who can manage everything perfectly, especially with their risk and money management. If we failed on these two things as the key, no matter what we do with our trading, the result of failure will always be cleared to see. I think deposit and capital management are included into whole package of money management, as well as to make things work accordingly to the plan.
    You are right because any kind of slip in discharging our responsibilities as a trader or any carelessness can bring us big loss. We as traders know the pain of facing big losses and so should understand the need to protect our capital. A strategy is very important to take trades but still the market remains uncertain and so money and risk management are more important.

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  8. #1897
    Rookie Toyen's Avatar
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    Quote Originally Posted by juniorpeters View Post
    i agree with you using stop-loss is actually the management we talk of risking very little part of our trading account for every signal we trade,the trader that lacks this knowledge still have a long way to go in this business.risking 10% of your capital is really something else that means i just ten losing trades you will be losing all your deposit to the market why not risk 5% i think that is better and safer.
    It is proper to be using the money and risk managements, and without the use of stop loss on this, it will not be nice for the trader. Those traders which will not be considering the use of stop loss will always be losing and they will not be able to make something good out of their hustling. We can set the amount to risk among our capital on every trade, and use stop loss to cut it rightly.

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