There is many ways to make your money management more effective, some of them we introduce below:
1. Never invest more than 5% of your all balance
This management its good when your trading accuracy have at least 65% of winning trades.
Sometimes you can loose 5-6 times in roll but you still will have 75% of your balance available, so you can still trading and win.
2. Reinvesting of profits
This is very simply to understand and very promising strategy.
If you have good accuracy of winning trades than you should test it.
The main Rules:
If our stock pair have 80% of return, we invest 100usd on first bet and if we win than we get 80 use profit. Than our next bet will be 80usd because we reinvesting profit from previous trade. And if we again won trade than we got 64usd profit. That means that from our first bet we make profit of total 144usd. So now our 3rd bet should be 144usd because we won 2 previous bets and reinvesting profits. If we win again we got 115usd plus ours amount we won from previous trades 144usd, that mean 259usd total profit from 3 trades:
So now for example if we loose our 4th bet than we loose only our profit without initial amount. We loose only when our initial amount loose, for example If we invest 1000usd, and our initial bet will be 100usd that means we can loose more than 10 times with this strategy.
Because if we investing only profits and for example we gonna loose in 2 or 3 trade than we come back again to initial amount of 100usd with balance of 1000usd. But if win 5 trades and we start with balance of 1000usd and we invest 100usd of initial amount than :
1bet – 100usd
2bet – 80usd
3bet – 144usd
4bet – 259usd
5bet – 466usd this trade if we win we get 838usd of our profit and our total balance become to 1838usd
But If we loose 5th bet than our balance come back to 1000usd of our starting balance. That means that the most important bet its first bet if we loose it than our balance come to 900usd.
3. Martingale strategy
This money management its considered as very risky strategy. However if you use it cautiously, than it can be very profitable money management. Many of traders use it to trade with binary options, with mixed results. We gonna show you how to use it properly, and not loose.
Martingale base on simply double bet when you loose it. If we loose bet of 10usd than our next bet should be 2,5 times bigger, in this case our next bet should be 25usd, and if we loose it than next bet 2,5 x 25usd = 62,5 usd. If we win our 3rd bet we cover all our previous losses because if our return from currency pair is 80% from amount 62,5usd we got 50usd of profit. With this 50usd we cover our lost bet of 10usd and 25usd and still we have 15usd of total profit)
1bet – 10usd (lost bet)
2bet – 25usd (lost bet)
3bet – 62,5usd (lost bet)
4bet – 156,25 (lost bet)
5bet – 390usd (profit trade)
At 5 bet we won and get cover of all lost previous bets, because:
10usd + 25usd + 62,5usd + 156,25usd = 253usd lost bets
We got profit from our last trade 390usd x 80% = 312usd
So 312usd of profit – 253usd from loss = 59usd of total profits.
So as you can see our lost bets was covered. There is few ways you can use martingale strategy:
– Invest not more than 3 or 5 bets in trade
– You should have limit of your loss and winning, for example you can decide that today you can win 1000usd or loose 1000usd
When you start trading with balance of 1000usd and you will make 1000usd than you will have balance of 2000usd and you stop trading for day.
– Never trade when market is very low
– Trade only when London or New York markets are open