Thread: 1) Do you have a question on Money Management?

i have one question. i for example have 50,000€. After your calculation i shouldnt risk more than 5% of my money. is that my "Margin blocked"? I wanted to invest in GER30, there is the cost for one pip = 1. if i am able to risk 100 pips and want to gain 200 - i am able to buy 25 lots, what makes 25€ per pip. is that calculation right? one pip are10,000€?

Originally Posted by iulian1989

i have one question. i for example have 50,000€. After your calculation i shouldnt risk more than 5% of my money. is that my "Margin blocked"? I wanted to invest in GER30, there is the cost for one pip = 1. if i am able to risk 100 pips and want to gain 200 - i am able to buy 25 lots, what makes 25€ per pip. is that calculation right? one pip are10,000€?

Hello Julian - your figures look correct.

If you want to risk 5% - you can break that up in a few ways... (25 lots with 100 point stop or 50 lots with a 50 point stop (or even 10 lots with a 250 point stop)). lot size can be larger with tighter stops. It really depends on how you want to trade that chart.

Nicely done on the calculation - best of luck in the trade!

what means the column - blocked margin - from my softwarr?

Originally Posted by iulian1989

what means the column - blocked margin - from my softwarr?

I'm not sure if it is a language translation issue - but I have not seen that column in the English version of Trading Station.

it may be minimum margin requirement? You are welcome to contact customer service to ask specifically for the language of the platform you are using.

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Originally Posted by Richard Krivo

The two "pillars" of money management are, as you mention, never risking more than 5% of your account and always having a 1:2 Risk Reward Ratio on your trades.

its easier to lose 5% than make 10% .. so we should be trying to make %10 of our account on every trade ? this would make the RRR 1 to 2

Originally Posted by allisonmagic

its easier to lose 5% than make 10% .. so we should be trying to make %10 of our account on every trade ? this would make the RRR 1 to 2

The main idea behind the 1:2 RRR is that you can lose more trades than you win and still be profitable. So on every trade that you risk 5% you would be shooting for 10%...1:2...knowing that each and every trade you take will not produce a win.

Keep in mind that the 5% amount is the MAXIMUM that we can place at risk and it also pertains to the total number of trades that we have open. 5% is the MAX risk that we can take on whether it is on one trade or five positions that are open at the same time.

So, if we have a $10,000 account and risk 5% or $500 on a single trade, for a 1:2 RRR we would be looking for a $1000 (10%) gain as you suggest. Those times when we are risking less than 5% then we would be looking for less than a 5 % gain to maintain the 1:2 RRR.