Powerup capital review #45

Hi it's been a while since we last posted.


We stumbled upon a good article on money management in forex, enjoy:

     The key to mastering money management is shifting your attention from the dollar value of your profits and losses to their percentage value of your account balance.

     Once you have trained yourself to think of your profits and losses exclusively in percentage terms it will be a simple mathematical task to stick to your money management system (e.g. just enter your constraints into the money management calculator and it will give you the number of lots to trade).

    As you account grows this practice will help you to avoid the hesitation in placing the trades when the absolute value of the dollars risked becomes very large - since you will know at that moment that you are still risking no more than amount dictated by your money management system (which will have played a major role in getting your account to that level in the first place).

    You should also remember that the outcome of any single trade is almost always random. It is, therefore, not practical to attach yourself too strongly - either emotionally or financially (by risking too much)- to the result of any one trade or a series of trades. This concept of randomness is incorporated into all the trading simulators on this site which use random number generators to determine if any single trade is profitable or not.

    As with the forex trading system, you can receive protection from your own destructive tendencies by closely following your money management system. 

    It will protect you from greed and pride (which always demand that you overtrade) when your system generates unusually large number of winning signals in a row. It will also protect you from trader paralysis (inability to open new positions) when your system goes through a losing streak because you will know that, as long as you risk a small fraction of your equity per each trade (as is set by your money management system) and use a currency trading system with positive mathematical expectation, no string of losses can wipe out your trading account.

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Hope this researched article had served you in someway in making you a better trader!

Warmest regards,

Team members of Powerup Capital Review