Review the money management (MM) models in Forex that must be known
First of all I want to review the definition of true Money Management:
Is Defense for us as a trader that can keep us exist in the market, and still be trading day by day.
Well need to know, "Distinguish between Stop loss level with the understanding of money management (MM)"
Why?
The answer:
- Understanding MM more to Risk management
- Stop loss level part of Risk management itself.
Hope to understand his words ...
Directly to the subject matter, As for the Risk Management types / types of money that we can meet in the forex market:
Martieangle
History recorded the MM type was originally created and in use in the world of "Gambling" and finally applied in the world of tading.
The running system doubles the position on each loss received in the hope after doubling the loss when the win can cover any existing loss
Example:
0.01 + 0.02 + 0.04 = 0.07 (loss) under Buy conditions
in Condition Buy Won in Lots 0,08 = then the calculation is 0,08 - 0,07 = 0,01 (Profit)
(As a calculation parable)
The role in this MM in the direction of "Probability"
This trading system is used by ARM Expert Advisor from Andrew & Team brothers
Binnary Equation Methode
The MM system is also derived from the gambling world ... and developed by French mathematician Jean De R'ondt De Allambrecth.
The system looks like this:
Any losses incurred are recorded, but when the next trading win is duplicated in accordance with the previous defeat, but with formula formula calculation.
Example Trading system using this method:
London Breakout System, New York Breakout System, Break and Bounce Trading system and so on.
Averaging
MM is almost like Martieangle, only difference lies in the amount of position (lot) is lowered remain the same, not duplicated like Martieangle.
Example The use of this MM is the Median Grid Technique from Dr. Forex
He trades only in the direction of the trends provided by Fundamental News as a whole,
Like the case below:
Buy 0.01 at 1.3200
turns the price down
Buy 0.01 at 1.3100
turns the price down again
Buy 0.01 at 1.300
(This is how the averaging system works)
Hedging
This technique uses the correlation between multiple currencies as a form of locking or indirect.
Example:
Directly, how it works:
buy 0.01 lot, suddenly the price move against the direction of the position
sell 0.01 to lock the losses
Indirectly, how it works:
eg EUR / CHF seems to want to go down, then sell 0.01 lot in EUR / USD
and Sell 0.01 lot in USD / CHF where indirectly hedging position is done.
In conclusion, there are 4 methods of Money Management are more widely used in forex.
For the source of his book "Profit Gap in Forex Market" Page 50-55,
Here are a few reviews that can ane info to the agan-agan as a lesson for us including ane so little know what the money management methods are ..