Hello! What specifically can change the money management in forex? Consider a real-world examples in the figures, in this case, they say, better than any words!
I spend some calculations that each reader can apply to their trade and improve the results. Go!
The methods of money management in forex.
1. Compound Interest works wonders! Even earning relatively little, but with patience and time, you can make a good profit. For example, there is a common trading strategy whose effectiveness is 20% per year. It would seem that it is for profit ?! Over 100 000 rub. total 20 000. in year. But annually reinvesting profits in 10 years get:
1. 100 000 + 20 000 = 120 000;
2. 120,000 + 24,000 = 144,000;
3. 144,000 + 28,800 = 172,800;
4. 172,800 + 34,560 = 207,360;
5. 207,360 + 41,472 = 248,832;
6. 248,832 + 49,766 = 298,598;
7. 298,598 + 59,720 = 358,318;
8. 358,318 + 71,663 = 429,981;
9. 429,981 + 85,996 = 515,977;
10. 515,977 + 103,195 = 619,172.
It's worth noting that not everyone has the opportunity to reinvest, but if it is, I advise you to use. The total yield of the example was 519% in 10 years.
2. How will yield, if done reinvestment of profit each month? Conditions are the same, but 20% is obtained in equal installments on a monthly basis: 1.66% per month.
Calculate to start income for 1 year:
1. 100 000 * 1.0166 = 101,660;
2 101 660 * 1.0166 = 103,347;
3. 103,347 * 1.0166 = 105,063;
4. 105,063 * 1.0166 = 106,807;
5. 106 807 * 1.0166 = 108 580;
6. 108 580 * 1.0166 = 110 382;
7 110 382 * 1.0166 = 112 214;
8. 112 214 * 1.0166 = 114 077;
9. 114 077 * 1.0166 = 115 971;
10 115 971 * 1.0166 = 117,896;
11 117 896 * 1.0166 = 119,853;
12. 119 853 * 1.0166 = 121 843.
Thus, the annual interest rate can be increased from 20 to 21,843. Let's see what this appointment will give over 10 years:
1. 100 000 * 1.2184 = 121,840;
2. 121 840 * 1.2184 = 148 449;
3. 148,449 * 1.2184 = 180,871;
4. 180 871 * 1.2184 = 220 373;
5. 220 373 * 1.2184 = 268,503;
6. 268,503 * 1.2184 = 327,144;
7 327 144 * 1.2184 = 398,592;
8. 398,592 * 1.2184 = 485,645;
9. 485,645 * 1.2184 = 591,710;
10. 591 710 * 1.2184 = 720 939.
Not bad, right? Instead of 519% of the profits, with monthly capitalization of interest, you can get 620%, ie 101% more. What if reinvested after each transaction? Well, you will count yourself!
3. How will the drawdown change if the interest rate applied to the calculation of the capital of each transaction?
Initially, 50 losing trades (risk 1% of the initial depot) in a row will bring a 50% drawdown.
Deemed to be:
1. 100 * 0.99 = 99;
2. 99 * 0.99 = 98.01;
3. 98.01 * 0.99 = 97.0299;
4. 97.0299 * 0.99 = 96.05;
5. 96.05 * 0.99 = 95.099;
6. 95.099 * 0.99 = 94.148;
7. 94.148 * 0.99 = 93.2065;
8. 93.2065 * 0.99 = 92.2744;
9. * 0.99 = 92.2744 91.3517;
10. 91.3517 * 0,99 = 90.438;
20. 81.7906;
30. 73.97;
40. 66.8971;
50. 60.5.
The result is obvious, so reception managed to reduce the drawdown of 10.5%! Initially was 50%, and was 39.5%.
4. Similarly, you can work towards increasing profits - is pyramiding. Details have already told in the article:
"Pyramiding increases profit?!?!?! Part 1."
"Pyramiding increase profits? Part 2: An effective way to wealth management. "
5. How to limit the size of the drawdown at a certain level? This is required when dealing with investors. Suppose that 30% - this is the maximum, no longer. Line up the money management system as follows: aggressively reduce the risk of a deal with increasing drawdown.
For example, if 10% loss normally risk (say 1%). When the loss of 10% to 20% lower risk doubled to 0.5%. When loss of 20% to 30% risk of 0.2%.
What does such an approach? At the risk of 1% of the original depot for the loss of 30% of the account it had to be 30 losing trades in a row. Now, to lose 30% of the capital needed 10 (1%) + 20 (0.5%) + 50 (0.2%) = 80 transactions.
When you exit the drawdown necessary to increase the risk at the levels where reduced.
Of course, this method will reduce profits, but the likelihood of achieving a certain drawdown becomes much less.
6. If the 5 time to risk everything in order to earn the same amount that is in the long run, you get the following:
$ 100 * 2 = $ 200;
$ 200 * 2 = $ 400;
$ 400 * 2 = $ 800;
$ 800 * 2 = $ 1600;
$ 1600 * 2 = 3200 $.
If you do not use in any analysis, and the probability of winning is equal to 0.5, then the probability of a successful construction of this pyramid will be the following:
0.5 * 0.5 * 0.5 * 0.5 * 0.5 = 0.03125.
This means that of the 100 attempts to get 3,125, slightly more than 3 times.
In 96,875 cases, it lost $ 100, or $ 9687.5.
In 3,125 cases, the prize will be for $ 3,200, or $ 10,000.
It turns positive expectation.
Who will find an error? :-)
That's all, with regard to capital management in forex.
Recently read the book "financier," wrote Theodore Dreiser. I have not read this! She captured me completely, and all the free time I have devoted to it. The action takes place in the early 20th century in America. The young man becomes a financial genius of that time, by the way, he and exchange operations conducted. There is love and other passions, all the content will not burn, will not be interesting to read. Name of boring, but the book leaves a strong impression, and in the process of reading provokes meditate, love these! :-)
Download can visit: FINANSIST
Now everything is over. Subscribers will learn about useful materials will all be glad if you find yourself among them.
See you soon!
The methods of money management in forex.
1. Compound Interest works wonders! Even earning relatively little, but with patience and time, you can make a good profit. For example, there is a common trading strategy whose effectiveness is 20% per year. It would seem that it is for profit ?! Over 100 000 rub. total 20 000. in year. But annually reinvesting profits in 10 years get:
1. 100 000 + 20 000 = 120 000;
2. 120,000 + 24,000 = 144,000;
3. 144,000 + 28,800 = 172,800;
4. 172,800 + 34,560 = 207,360;
5. 207,360 + 41,472 = 248,832;
6. 248,832 + 49,766 = 298,598;
7. 298,598 + 59,720 = 358,318;
8. 358,318 + 71,663 = 429,981;
9. 429,981 + 85,996 = 515,977;
10. 515,977 + 103,195 = 619,172.
It's worth noting that not everyone has the opportunity to reinvest, but if it is, I advise you to use. The total yield of the example was 519% in 10 years.
2. How will yield, if done reinvestment of profit each month? Conditions are the same, but 20% is obtained in equal installments on a monthly basis: 1.66% per month.
Calculate to start income for 1 year:
1. 100 000 * 1.0166 = 101,660;
2 101 660 * 1.0166 = 103,347;
3. 103,347 * 1.0166 = 105,063;
4. 105,063 * 1.0166 = 106,807;
5. 106 807 * 1.0166 = 108 580;
6. 108 580 * 1.0166 = 110 382;
7 110 382 * 1.0166 = 112 214;
8. 112 214 * 1.0166 = 114 077;
9. 114 077 * 1.0166 = 115 971;
10 115 971 * 1.0166 = 117,896;
11 117 896 * 1.0166 = 119,853;
12. 119 853 * 1.0166 = 121 843.
Thus, the annual interest rate can be increased from 20 to 21,843. Let's see what this appointment will give over 10 years:
1. 100 000 * 1.2184 = 121,840;
2. 121 840 * 1.2184 = 148 449;
3. 148,449 * 1.2184 = 180,871;
4. 180 871 * 1.2184 = 220 373;
5. 220 373 * 1.2184 = 268,503;
6. 268,503 * 1.2184 = 327,144;
7 327 144 * 1.2184 = 398,592;
8. 398,592 * 1.2184 = 485,645;
9. 485,645 * 1.2184 = 591,710;
10. 591 710 * 1.2184 = 720 939.
Not bad, right? Instead of 519% of the profits, with monthly capitalization of interest, you can get 620%, ie 101% more. What if reinvested after each transaction? Well, you will count yourself!
3. How will the drawdown change if the interest rate applied to the calculation of the capital of each transaction?
Initially, 50 losing trades (risk 1% of the initial depot) in a row will bring a 50% drawdown.
Deemed to be:
1. 100 * 0.99 = 99;
2. 99 * 0.99 = 98.01;
3. 98.01 * 0.99 = 97.0299;
4. 97.0299 * 0.99 = 96.05;
5. 96.05 * 0.99 = 95.099;
6. 95.099 * 0.99 = 94.148;
7. 94.148 * 0.99 = 93.2065;
8. 93.2065 * 0.99 = 92.2744;
9. * 0.99 = 92.2744 91.3517;
10. 91.3517 * 0,99 = 90.438;
20. 81.7906;
30. 73.97;
40. 66.8971;
50. 60.5.
The result is obvious, so reception managed to reduce the drawdown of 10.5%! Initially was 50%, and was 39.5%.
4. Similarly, you can work towards increasing profits - is pyramiding. Details have already told in the article:
"Pyramiding increases profit?!?!?! Part 1."
"Pyramiding increase profits? Part 2: An effective way to wealth management. "
5. How to limit the size of the drawdown at a certain level? This is required when dealing with investors. Suppose that 30% - this is the maximum, no longer. Line up the money management system as follows: aggressively reduce the risk of a deal with increasing drawdown.
For example, if 10% loss normally risk (say 1%). When the loss of 10% to 20% lower risk doubled to 0.5%. When loss of 20% to 30% risk of 0.2%.
What does such an approach? At the risk of 1% of the original depot for the loss of 30% of the account it had to be 30 losing trades in a row. Now, to lose 30% of the capital needed 10 (1%) + 20 (0.5%) + 50 (0.2%) = 80 transactions.
When you exit the drawdown necessary to increase the risk at the levels where reduced.
Of course, this method will reduce profits, but the likelihood of achieving a certain drawdown becomes much less.
6. If the 5 time to risk everything in order to earn the same amount that is in the long run, you get the following:
$ 100 * 2 = $ 200;
$ 200 * 2 = $ 400;
$ 400 * 2 = $ 800;
$ 800 * 2 = $ 1600;
$ 1600 * 2 = 3200 $.
If you do not use in any analysis, and the probability of winning is equal to 0.5, then the probability of a successful construction of this pyramid will be the following:
0.5 * 0.5 * 0.5 * 0.5 * 0.5 = 0.03125.
This means that of the 100 attempts to get 3,125, slightly more than 3 times.
In 96,875 cases, it lost $ 100, or $ 9687.5.
In 3,125 cases, the prize will be for $ 3,200, or $ 10,000.
It turns positive expectation.
Who will find an error? :-)
That's all, with regard to capital management in forex.
Recently read the book "financier," wrote Theodore Dreiser. I have not read this! She captured me completely, and all the free time I have devoted to it. The action takes place in the early 20th century in America. The young man becomes a financial genius of that time, by the way, he and exchange operations conducted. There is love and other passions, all the content will not burn, will not be interesting to read. Name of boring, but the book leaves a strong impression, and in the process of reading provokes meditate, love these! :-)
Download can visit: FINANSIST
Now everything is over. Subscribers will learn about useful materials will all be glad if you find yourself among them.
See you soon!
