Quote:
Originally Posted by babytrader
Thanks Jeremy.
I do understand the need to risk only a small portion of capital on any SINGLE trade. But I also want to put my money to work by having up to 90% of my capital spread across many little trades at any one time. I mean why should I tie down $100k in the account, but have only $1k working at any one time. Am I making sense?
Also, I am experimenting with the use of fixed ratio money management to channel capital to performing systems. Right now I have both ratio base and delta set to 100. Any thoughts on that?
And if you could please explain to me how to use the Fixed Fractional option. I find it confusing.
Thanks
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Sure Babytrader, I understand where you are coming from. I haven't tried a strategy like that so I am interested how it works out for you. With 90% of equity tied up in margin, you run a high risk of margin call which will close out all open positions and take you out of what may otherwise be good positions. Just be careful about opening too many positions and have too little usable margin left over to cushion those adverse market movements.
Additionally, some trades may end up 'off setting' one another. So there is a point of utility where more systems and more currency pairs may not add value at the margin versus what you are giving up (you are using up margin and wiggle room to open positions that essentially cancel out another trade).
Regarding the money management, you are correct the fixed ratio or fixed fractional is a way to funnel more resources to the better performing systems.
HERE is a link to describe them further. Essentially on fixed fractional you devote a certain percentage of your account to be risked on each trade. As your account grows, the trade size grows with it. As your account shrinks, your trade size shrinks as well. You will need an idea of how far in pips the stops are typically placed. You can gather some of that information from the INFO column of the PERFORMANCE tab in the platform.
You can go ahead and try those in a demo to get a feel for it. Like I said, let me know how it works for you.
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