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

Should you have a question about Money Management, here is the place where you can ask an instructor. The instructors are available 24 hours per day during worldwide business hours (Sunday afternoon thru Friday afternoon New York time). You will see the instructor's response posted after your question. (If you need help posting a chart, watch this short VIDEO.)

Originally Posted by Jeremy Wagner

Should you have a question about Money Management, here is the place where you can ask an instructor. The instructors are available 24 hours per day during worldwide business hours (Sunday afternoon thru Friday afternoon New York time). You will see the instructor's response posted after your question. (If you need help posting a chart, watch this short VIDEO.)

Greeting !

It's been a while since I last posted here on the forum , hope everybody
is doing well .

I've just view the intro' video about money management what I agree
with its importance m sometime learned in the hard way .. I have few
comments and will appreciate your reference .

1. From my experience , and also you mentioned it yourself with the
trailing suggestion to the entry point when the mkt does half of the
way to your target , its really very tough to come-out in the reality
with 1/2 RRR ratio

2. Stop and targets levels should be determine by the situation of the
mkt rather than what we agree to risk or wish to target , as the mkt
really has no concern of what our predetermine trading rules are and
move as desire.

B. Regards for each .
Dror.

Originally Posted by Dror

Greeting !

It's been a while since I last posted here on the forum , hope everybody
is doing well .

I've just view the intro' video about money management what I agree
with its importance m sometime learned in the hard way .. I have few
comments and will appreciate your reference .

1. From my experience , and also you mentioned it yourself with the
trailing suggestion to the entry point when the mkt does half of the
way to your target , its really very tough to come-out in the reality
with 1/2 RRR ratio

2. Stop and targets levels should be determine by the situation of the
mkt rather than what we agree to risk or wish to target , as the mkt
really has no concern of what our predetermine trading rules are and
move as desire.

B. Regards for each .
Dror.

Yes...the 1:2 RRR makes the most sense when there is enough room for the pair to move to that predetermined level of profit.

Originally Posted by Richard Krivo

Yes...the 1:2 RRR makes the most sense when there is enough room for the pair to move to that predetermined level of profit.

Thanks for your response Richard .

As we previously discussed , If you use 1:2 RRR ratio or more as Matt
pointed out it will be easy to stay at the top of your money management
risking no more than 5% at any given time .

However , you want to remember , that out there profitable systems with
1:1 RRR or even lower RRR as long as theirs winning probability is high .
e.g. 1:1 RRR with 60% winning probability does very well , (win 6 times of
10 and loss only 4 ) .

Thanks Dror.

Originally Posted by Dror

Thanks for your response Richard .

As we previously discussed , If you use 1:2 RRR ratio or more as Matt
pointed out it will be easy to stay at the top of your money management
risking no more than 5% at any given time .

However , you want to remember , that out there profitable systems with
1:1 RRR or even lower RRR as long as theirs winning probability is high .
e.g. 1:1 RRR with 60% winning probability does very well , (win 6 times of
10 and loss only 4 ) .

Thanks Dror.

Yes...

As long as you are right more often than not, those can be profitable as well...and that is the key.

With a 1:2 RRR a trader need only be right 4 out of 10 times to be profitable...a less risky trading proposition.

In the end, it is what each individual trader decides in the trading of their own account.

Originally Posted by Richard Krivo

Yes...

As long as you are right more often than not, those can be profitable as well...and that is the key.

With a 1:2 RRR a trader need only be right 4 out of 10 times to be profitable...a less risky trading proposition.

In the end, it is what each individual trader decides in the trading of their own account.

Hello Richard and all .

Money management is all about safety and long lasting in the mkt .

However what do you mean when you say 1:2 RRR is less risky trading
proposition ?

You do remember that the less your RRR is the more chances that you
will be correct with your prediction . e.g. if I choose 1:3 RRR I likely
to be less often correct than if I choose 1:2 RRR ..

I'm going now into being more conservative trader than I was so far,
and have already have been having few improvement toward ,

1. I trade less often than I used to .
2. I limit the # of my open position at the same time and headed
to max of 2 or even one .

I still trading the short time frame however I select my trades more
carefully to have only strong trading mkts.

Now I'm looking into my money management approach to see what
can be improve here as well , I often do have great set ups with
less than 1:2 RRR even though, of course ,I prefer the highest RRR
I can be having .

I 'm maybe half way into being the conservative that I want to be
in this stage of my trading career and I love it .. so many advantages ..

Dror.

Originally Posted by Dror

Hello Richard and all .

Money management is all about safety and long lasting in the mkt .

However what do you mean when you say 1:2 RRR is less risky trading
proposition ?

You do remember that the less your RRR is the more chances that you
will be correct with your prediction . e.g. if I choose 1:3 RRR I likely
to be less often correct than if I choose 1:2 RRR ..

I'm going now into being more conservative trader than I was so far,
and have already have been having few improvement toward ,

1. I trade less often than I used to .
2. I limit the # of my open position at the same time and headed
to max of 2 or even one .

I still trading the short time frame however I select my trades more
carefully to have only strong trading mkts.

Now I'm looking into my money management approach to see what
can be improve here as well , I often do have great set ups with
less than 1:2 RRR even though, of course ,I prefer the highest RRR
I can be having .

I 'm maybe half way into being the conservative that I want to be
in this stage of my trading career and I love it .. so many advantages ..

Dror.

As mentioned in the prior post, trading with a 1:2 RRR means a trader need only be right 4 out of 10 trades to be profitable. Trading with a 1:1 RRR means that a trader needs to be right in more than 5 out of 10 of their trades to be profitable. Being right 4 out of 10 times is easier to achieve than is 5+ times out of ten so there is less risk.

In addition to the Risk Reward Ratio, we must also remember to do our due diligence on each and every trade so that we are only entering higher probability trades...trading in the direction of the Daily trend for example That, coupled with a 1:2 or better RRR will put us on a higher probability trading path.

Thanks for the input on your evolution as a trader...

Originally Posted by Richard Krivo

As mentioned in the prior post, trading with a 1:2 RRR means a trader need only be right 4 out of 10 trades to be profitable. Trading with a 1:1 RRR means that a trader needs to be right in more than 5 out of 10 of their trades to be profitable. Being right 4 out of 10 times is easier to achieve than is 5+ times out of ten so there is less risk.

In addition to the Risk Reward Ratio, we must also remember to do our due diligence on each and every trade so that we are only entering higher probability trades...trading in the direction of the Daily trend for example That, coupled with a 1:2 or better RRR will put us on a higher probability trading path.

Thanks for the input on your evolution as a trader...

Its my pleasure ..

You wrote :"Being right 4 out of 10 times is easier to achieve than is 5+ times out of ten "

my reply: that true , but as the same time, being right for closer target (1:1
or less ) prediction is easier to achieve than being right for far target (1:2 or
more, ) if so 1:2 RRR or more no necessarily to be more safe approach to
choose for money management than 1:1 or less .

Does it make sense ? or ?

Originally Posted by Dror

Its my pleasure ..

You wrote :"Being right 4 out of 10 times is easier to achieve than is 5+ times out of ten "

my reply: that true , but as the same time, being right for closer target (1:1
or less ) prediction is easier to achieve than being right for far target (1:2 or
more, ) if so 1:2 RRR or more no necessarily to be more safe approach to
choose for money management than 1:1 or less .

Does it make sense ? or ?

If you are trading with the strongest trending markets you can find, then it is easier to look for twice in profits as you are willing to risk.

Originally Posted by Thomas Long

If you are trading with the strongest trending markets you can find, then it is easier to look for twice in profits as you are willing to risk.

Hello Thomas .I can find 1:2RRR or even better , but how will you be deciding
that the mkt will hit that target or other ?

Good Morning Guys .

In "Trading for living " Dr. Alexander Elder discussing risking 2% of your
account or even less on every single trade what you guys think about it ?

Thanks .

Originally Posted by Dror

Hello Thomas .I can find 1:2RRR or even better , but how will you be deciding
that the mkt will hit that target or other ?

I let the trend decide. If I pick the right trending pair to begin with, the momentum of that trend allows me to look for twice my risk in potential profit.

Originally Posted by Dror

Good Morning Guys .

In "Trading for living " Dr. Alexander Elder discussing risking 2% of your
account or even less on every single trade what you guys think about it ?

Thanks .

We recommend not risking more than 5% of your account balance at any one time. If you risk 5% on one trade, you should not open a second trade until the first is closed or your stopped has been moved to breakeven.

Originally Posted by Thomas Long

We recommend not risking more than 5% of your account balance at any one time. If you risk 5% on one trade, you should not open a second trade until the first is closed or your stopped has been moved to breakeven.

Thanks , any idea why 5% , why not 10% or 2.5 % for example (what I
know some people to trade that way ) ?

Originally Posted by Thomas Long

I let the trend decide. If I pick the right trending pair to begin with, the momentum of that trend allows me to look for twice my risk in potential profit.

When you say momentum you mean the angle of the trend ?