Share the money management strategies talked about in the book Trading for a living
read:2023/2/25 23:15:35
The money management stforextradingaccountsregisterategies talked about in the book "Trading for a living" Forex trading experience tips www.waihuibang.com/fxschool/experience/: If Your principal forextradingaccountstype your life, the market may be like a shark a bite to swallow him, only once a heavy loss can eliminate you out of the futures forex trading accounts other leveraged markets piranha style: the market may also be like a piranha bite you to death, each bite may not be fatal, but has to go on will make you a pile of white bones money management model a --- shark-proof style again powerful trading moves success rate will not have 100%, anti-shark is to prevent you from trading in the process of being eaten a large bite (a large bite of the concept of a transaction down with the loss of total funds), how to do? Diversification, is it diversification in different markets? No, it is the number of funds used each time familiar with the success rate of your trading moves: if the teacher taught moves, be sure to ask, if it is self-created, take only 10% of the funds to test, repeatedly test, to come up with the success rate frequency: too low, short term meaningless, too high, is not good, to understand, really good opportunities will not appear too many times suitable market conditions: in the right market conditions, the probability will increase, and Otherwise, it will reduce the profit and loss ratio: the most critical to know the stop loss, odds, resistance, support levels where the four points respectively, all the moves must be clear! Anti-shark money management mode of use environment 1. bear market or down channel trading a when the move the more unsure, the less money should be used (but not too little, 1/10), a reasonable allocation 2. you are not familiar with the new move a no matter how powerful this move 3. each transaction can accommodate far more than the funds you use each stock has its own capital capacity, look at the code list, the A stock retail trading can only account for 3% of the total transactions, more than 3%, you will be cleaned out by the main force, that is, the amount you buy can not exceed 3% of the total number of pending orders, and can not buy the main force of the chips, how to see? Hanging single is mostly the main force of the single, you always hang below, waiting, can not take the initiative to buy, the main force in the absorption of goods, you also buy, and the main force to grab chips, there are benefits? You deal must be the retail chips, which is why some stocks Haining teacher said that you can not buy, so you know, a lot of stocks you can not buy, you hang below people just do not give you to buy against the above, can only be used for new shares and collection of bidding two situations, because everyone is hanging there, no one look at you, other times the main force to see at a glance, as long as you dare to rush, at least wash you 1-3 days, remember not to More than code single volume of 3% code single here to solve two problems, one is to buy how much, the second is how to buy 4. novice, beginners in the stock market or futures market 2% anti-shark rules 1. one of the most important rules is to limit the loss of each transaction to only a small percentage of your account 2. limit the loss of any transaction in your trading account within 2% of the net funds 3. 2% rule refers only to your trading account does not include your deposit, the Family property, retirement accounts or other savings accounts4. This is the standard for professional traders, and can be no more than 1% cashback forex money if you are conservativeYou have $1 million in capital, if you buy a stock and the stock price is $10 and you stop out when it falls to $9, then the stop loss in between is $1. The risk money to buy this stock cannot exceed 2% of your overall capital, which is $20,000, and you buy the The number is equal to the risk money divided by the stop loss, which is equal to 20,000 shares, the occupied capital is equal to the stock price share price * 20,000 shares, which is called 2% of the risk money trading limit of this 20,000 shares is the theoretical maximum number, in fact, this number should be lower, because you must pay commissions and be prepared to cope with the impact of slippage spreads all these costs must not add up to more than 2% of the limit, so reduce the amount by 1/4, that is 15,000 shares, is your trading limit – this controls your risk to the maximum and allows you to survive a bear market Different reactions to the 2% Ive noticed a very strange difference in peoples reactions to the 2% rule: poor beginners think the number is too small and Ive been asked if the 2% rule can go up a bit for small accounts I say that if you go bungee jumping and extend the There is nothing good about the rope while my teachers react the opposite way, they often say that 2% is too high and they try to make the risk a little lower This is the difference between veterans and novices, veterans are always first to save their lives, second to save their lives and finally to save their lives, novices are first to make money, second to make money and finally to lose money Professional traders vs. amateur traders A very successful arbitrage fund manager told me that from He has never risked more than 0.5% of his net capital in a single trade – and now learns to increase the risk ratio to 1% good traders cryptic 2% under the limit Although this amateur traders and experts have opposite opinions, but you know which side to choose to try to keep the risk below 2% – Because thats the maximum risk Routinely check whenever you trade that your logical stop loss meets the 2% rule If a trade requires a higher risk, then abort the trade On the first of every month, check your accounts net money If the starting month is when you have $100,000 in your account, then the 2% rule allows you to risk $2,000 per trade Rewards and penalties are clearly defined If you took a profit last month and your net If you lost money last month and your net money dropped to $95,000, the 2% rule will limit your risk to $1,900 for the next month. This makes your trade amount linked to your performance: the better you are, the more money you manage, and vice versa. The stock market is the biggest risk market, so the first thing to do is to manage risk with the 2% rule for multiple accounts. The losing trader thinks that a successful trade is coming and that he is about to have his moment. He keeps increasing the number of trades and increasing the amount of trades, but he is actually digging his own grave. Neat teeth, it does not look scary, but if a dog, a man or a monkey misses a step and falls into the river, a group of piranhas will come and attack him and keep biting and eating until the victim is pulverized For example, if you keep looking long in a long descending channel, you may fall into the river at any time and be attacked by piranhas, and after a few minutes you will see his skeleton reflected in the water in a bright light 6% anti-piranha rule Particularly suitable for participants who like to do short term, traders use the 2% rule to fend off shark attacks, but also must use the 6% rule on to protect themselves from piranhas as long as your account capital is down 6% from the end of the previous month, the rest of the month stop trading daily calculated capital, including the cash in your account, the current market value of all open positions leave the market as long as your capital loss is close to As soon as your capital loss approaches 6% of your capital on the last day of the previous month, stop trading immediately to close all open positions and spend the rest of the month off the market to continue monitoring the market, tracking your favorite stocks and indicators, and if you wish, do some simulated trading to revisit your trading system, was the loss an accident or was your system inherently flawed? Using the 2% rule in combination will save you from fatal losses, while the 6% rule will help you escape a series of losses The 6% rule forces you to do what most people cant consciously do to stop a losing position Use the 6% rule and the 2% rule in combination, as if you had your own trading manager Practical examples For simplicity, assume 2% of each trade is at risk, although in practice we will Try to reduce the risk at the end of the month, calculate your is capital and find that there is $100,000 and no open positions write down your maximum amount of risk for the next month, for each trade it is 2% or $2,000, for the total account it is 6% or $6,000 After the opening of the day, you find an attractive new stock PLA stock A and plan where to set a stop loss, buy a position and put $2,000 at risk Two days later, you have your eye on platform breakout pattern stock B, and you make a similar trade, putting another $2,000 at risk as well Fast forward to the weekend, and you are bullish on high open positive eating negative stock C, so you buy it again, and end up with $2,000 at risk as well At this point, you see stock D again, who is more attractive than any of the first three stocks, the Because Mr. Gao himself told you that this is a digging a hole to complete the stock, the success rate of 98%, you should buy in? No, because your account already has 6% at risk you have established three positions, each with a risk of 2%, that is, if the market is not favorable to you, you will lose 6% at this time, the 6% rule prohibits you from continuing to risk the success rate of 98%, there is also a 2% possible loss, or belong to the risky trade two days later stock A rose sharply, you move the stop loss above the no-loss level (stop loss becomes until (Earnings, the stock is risk-free) At this point, a few days ago not allowed to trade the stock D still looks fascinating, still at the bottom of the pit So, can you buy it now? Buy! Because currently your risk is only 4% of the account capital, the risk of stocks B and C are 2%, and because the stop-loss level has been higher than the no-loss level, A has been in a zero-risk state you buy stock D, so that there is a $ 2,000 at risk in the next later, you found stock E, looks absolutely great bull stocks, because it is Haining teachers personal comments you should buy? No, according to the 6% rule, should not buy in, because in stocks B, C, D (As principal is not at risk), your account already has 6% at risk, must give up E (because no stock is risk-free) a few days later stock B fell, triggering its stop loss stock E still looks fascinating, this you should buy in? No way! Because on B, you have lost 2%, in C and D, there is still 4% exposed to risk, at this point to increase any position will make his account this month the amount of risk exceeds 6% The same applies in a bull market, it will make your positions heavier and heavier, managing more and more money 6% rule keeps you safe from piranhas When they start to bite you, get out of the water and avoid them. Dont let the vicious ones slowly bite you to death Risk money and positions If you risk less than 2% per trade, you may have more than 3 positions at the same time The key is how to set the stop loss and stop gain If you risk only 1% of the principal of your account, you can establish 6 positions before reaching the 6% limit Principal reset 6% rule, protect your principal The starting point is your principal from last month, do not add this months earned If you made a good profit last month, you will have to reset your stop loss and trade positions when you enter the next month, so that the amount at risk for any one trade does not exceed 2% of the new principal and the total risk for all open trades does not exceed 6% of the new principal Position Reset When you trade well and your account principal rises at the end of the month, the 6% rule allows you to trade a larger position in the next month if you underperform, it will reduce your trading position for the following month when you take consecutive profits, the 6% rule encourages you to increase your trading position, when there is a consecutive loss, 6% will make you stop trading if the market moves in your favor, you move your stop loss above the no-lose level and build more positions (assuming all your tickets are profitable, also to prevent systemic risk, especially at important time points) If your stocks or futures start to move against you and trigger a stop loss, you will lose the maximum allowable loss for the month and terminate the trade, protecting most of your account to continue trading the next month This money management system helps you make money in bull markets and helps you avoid losses in bad markets Be a faithful executor The 2% rule and the 6% rule provide guidelines for pyramiding accumulative positions Increase being profitable If you buy a stock and it starts to rise, then you move your stop loss above the no-lose level, you can buy more of the same stock as long as the risk on the new position does not exceed 2% of the account principal and the total account risk is less than 6%, then you can buy more of the same stock each time you accumulate as a separate trade Most traders are in a constant state of mood swings, giddy at the highs and Depressed and frustrated, what do you do if you want to become a disciplined trader and the 2% and 6% rules will convert your willingness to the reality of safer trading? What should you do if you are a serial trader who is losing money? A trader complains that he has lost the last 13 trades in a row First, I would like to bow to this trader, including all those who have lost 13 times in a row and still have the courage to continue trading on another morning Second, what you need to do is to significantly reduce your trading position to 100 shares at a time – this time is not to make a trade, but to practice and test your moves Winning rate from a small position know that you have more profitable days than losing days in two consecutive weeks, and the total for the win, once you have overcome that obstacle, you can trade 200 shares then, when another two-week profitable period has passed, you can trade 300 shares, and so on every two weeks of profitable trading, you are allowed to trade 100 shares more if you have a In other words, you should start with a small position, increase it slowly, and if there is a problem, reduce the trading position as soon as possible from loss to profit. But after all, he had started to make money and continued to do so for the next week, and then the position went up to 200 shares Why do large positions lose and small positions gain? When the risk level rises, your performance ability and resilience decreases beginners tend to make money when trading small amounts, that makes you gain a little experience and confidence, but increase the trading position and start losing money that is your system has not changed, your ability to bear has not improved, larger positions make you lose confidence a little, and thinking is not so quick most beginners are eager to make a lot of money, but the desire for speed is not achieved Overtrading, especially trading positions that are too big for you, is a fatal mistake. Once you have become familiar with how to trade to find targets, enter at the right time, set stops and profit targets, and exit correctly, you can gradually increase your trading position so that your account starts to generate a significant income for you with the seven money management steps of the 2% and 6% rules 1. For each trade, determine your entry point and stop loss point (this is determined by your trading pattern): express the amount of risk per share as cash 5. Calculate the risk of all open positions by multiplying the spread between the entry point and the current stop loss by the number of shares. If the total risk is 4% of your account or less, you can create another position and trade with a 2% risk to bring the total risk to 6%, remembering that you dont have to risk every trade at 2%, but can risk less if you wish. The size of a trading position is determined by the amount of risk you can take, not by how much money you want to make. The fascinating thing about this capital management system is that when your performance is down, it cuts off your losses, and when youre outperforming, it gets you going – cut off losses and let profits run Monthly replacement cost 1. Can look for new transactions 4. If the stop loss has not yet reached the no-loss line, the total value of the account X 6% – has occupied the risk of gold, according to decide whether you can trade multiple accounts of money management Forex Library www.waihuibang.com/fxschool/fxbook/ The first question is how to apply the 2%, 6% rule when trading futures, stocks and options at the same time? The primary issue is that a beginner should concentrate on a single market Only when you have achieved success can you spread your money across a variety of markets If you trade multiple markets, the accounts must be separated, treating each account as a separate trading unit and executing them separately