You are here: Home / Archives for Money Management

Forex Money Management Strategies

July 1, 2011 By lseasymo Leave a Comment

Most people getting started in the foreign exchange business focus all their attention in learning a good Forex strategy, method or system. Most of them think that if they become able to make profitable trades they will become profitable traders and eventually trade Forex for a living… That’s where most of traders are completely wrong!

 

A Forex strategy, method or system it’s just an instrument to determine when a price or market conditions offer a good investment opportunity. The way we manage money is what determine if we’ll get rich or go broke trading those opportunities.

 

So as you can see, having a good Forex money management system is extremely important.

 

But what exactly is money management?

 

Money Management it can be a strategy or system to move money from a place to another minimizing loses and maximizing profits.

Many people think that defining their risk to 2-3% per trade and calculate the distance for the stop loss and the pip value in every trade, is money management…

And yes this is an important part of a money management strategy, but there is a lot more in it…

 

 

In this article we will discuss a few Forex money management strategies

 

That’s the first step to take in consideration to manage money in Forex.

Most retail traders can afford to invest 1-5k in their business, some of them even less than 1k. Although high leverage give us the chance to buy/sell large amounts of money with a small margin deposit, not every broker allow micro accounts where a trader could buy 1K lots instead of the mini 10K and standard 100K lots.

Some brokers even support lots of 100 units of base currency, very few like Oanda will allow you to buy single units.

Micro accounts are better because they allow traders to distribute risk equitably avoiding the asymmetrical leverage, which is deadly dangerous for traders.

 

Watch this video for more information on the difference of using micro and standard accounts with smaller than 10K accounts and the dangers of asymmetrical leverage:

http://www.youtube.com/user/TheProTraders#p/a/u/0/V6aCmCCRdvQ

 

 

This money management strategy is helpful for recouping quickly from losses, the trader will trade a % of the account when successful but will trade a fixed amount when a unsuccessful trade hits:

e.g.

 

10.000$ 2% risk = 200$ RR= 2:1 GAIN= 400$

10.400$ 2% risk = 208$ RR= 2:1 GAIN= 416$

10.816$ 2% risk = 216$ RR= 2:1 LOSS= 216$

10.600$ FIXED A= 216$ RR= 2:1 LOSS= 216$

10.384$ FIXED A= 216$ RR= 2:1 GAIN= 432$

10.816$ 2% risk = 216$ RR= 2:1 GAIN= 432$

11.248$ 2% risk = 224$ and so on…

 

It takes you only one trade to recoup completely from two losses.

 

Compounding is a very powerful long term money management strategy. Basically reinvesting the gains of each successful trade and avoid making withdrawals for a relatively long period of time will boost your account like you never imagined!

 

This video will explain you how to benefit from compounding:

http://www.youtube.com/user/TheProTraders#p/u/1/sWcDI6ScEK8

 

This concept allows a more aggressive trading approach.

The trader split his total trading capital in two, one for risk and one for safe.

The risk account is the 5% of the total trading capital, the rest 95% is in a separated safe account. The trader will only trade with the risk account (5% of total trading capital), but will risk 15-20% of the risk account. Each time he doubles the account he recalculates the 5% of the total invested capital and re-split the money equitably in the two accounts.

 

Implementing one of those Forex money management strategies or mix a few of them will allow you to maximize profits and minimize losses the best way possible.

 

You can learn about the Forex method’s we use to implement those money management strategies in the

“Pro Retail Trading is a group of professional full time traders committed to educate and empower traders from all walks of life, no matter their experience level.”

 

Discover The Exact Systems We Use To Exploit Institutional Order Flow And Make Consistent Profits Daily In Less Than 4 Hours of Work Per Day, Completely FREE At:

[

live.pirillo.com – Chris and Ponzi share some of their personal money management stories. We get to learn two things: 1) Chris is horrible at math. 2) Chris hates pennies.

Find More Money Management Articles

Filed Under: Money Management Tagged With: , , ,

Money Management

July 1, 2011 By lseasymo Leave a Comment

MONEY MANAGEMENT

By J. Chabrotta

www.bmshandicappers.com


Part 1


First, let me say that even if you have a better than average winning percentage you will fail to

make profits if you do not use or incorporate a faulty money management system.

Professional gamblers, stocks and bonds traders, arbitragers, or any similar professionals understand the necessity of valid money management systems. There are several reasons for the need of such a system. The obvious one is to decrease risk while maximizing profits. Another reason was told to me by Paul Paulson of moneykeg.com and author of Money and the Middle Man. He explains,


“The reason for money management, in my opinion, is so that a bettor can comfortably utilize his edge. Notice that I did NOT say “maximize” his edge. The reason is because if you size your bets solely with the purpose of maximization, you trigger, albeit inadvertently, the biggest obstacle facing bettors – psychology.

What I am trying to say is that the more you ‘optimize’ your bet size system (what I consider a money management system as opposed to a picking system where you aim to pick the “winner” game, race, etc.), the larger your potential draw downs.”


By way of example, let’s say you have a bankroll of ,000. If you ‘optimize’ your bet in a simulation using techniques like, optimum f or the Kelly criterion, then your total bankroll will fluctuate more violently than if you size your bets with a simple 1% total bankroll bet. The ‘optimized’ simulation may draw down your account over 30% in some instances while the latter will likely yield much less than that.


The point is this: How will you ‘feel’ about your system after a draw down of 30%? Is it likely that you will continue using the system? Or will your “better judgment” win out as you add this picking system to the picking systems’ scrap heap? I would venture to guess that most bettors would stop betting the system if a large draw down occurred. The problem is that statistically, a system with a positive expectancy will still have large streaks of winners and losers. If you should be so unfortunate as to start utilizing your strategy just before one of those inevitable losing streaks, then you will experience significant destruction of your funds.


The lesson here is to minimize your draw downs to a level where you feel comfortable. That is, use a bet size where if you experience a string of losers, (which you will) then you will still move forward and still gain that statistical advantage called ‘positive expectancy’. If you make your bet size such that each bet has no significant emotional effect, then you are practicing the proper money management. If a bettor can achieve this, then he will know what it is like to have 13 losers in a row in a good system. More importantly, he will be psychologically stable enough to weather the storm and achieve the profits he deserves for having the ability to foresee such occurrences and plan for them accordingly.”


In simple terms, it is important to use a money management system that allows your bet size to be within your comfort level. Using a money management system will help your psychology withstand losing streaks. A bettor should make their bet size in relation to their bankroll small enough that there is no emotional effect on the outcome. This will enable you to stay with a system long enough to see if works.


There are several valid money management systems and some schemes that are not so prudent. Many of these will be discussed in later articles. For now, we will discuss a “percentage of bankroll”. In this system, the player will risk a percentage of his current bankroll. For this discussion, we will use a 2% bankroll ratio for the bet. We like this amount because as explained above must people do not have the discipline or stomach to see large losses. As you can see in the illustration below, we start with a ,000 bankroll so our first bet will be 0. As our bankroll increases and or decreases so will our bet size. We also make the assumption that we will have a 60% winning probability. Bull Market Sports Handicappers has an average three year winning probability of 64.65% so we will be conservative and use 60% in our illustration. This means that for every 100 bets there will be 60 winners and 40 losers. As you can see in the illustration, one can expect to net ,493. This makes your total bankroll ,493 at the end of 100 bets.


We will now compare this to a same size bet system. We will start with the assumption that we will win 60 games with a bet size of 0. This will produce ,000 in gross winnings. Now take the 40 losers at 220 (don’t forget the vigorish) which yields 8,800 in gross losses. The net profit will be ,200. This is are not bad but not as good as the percentage of bankroll illustration.


Some people who subscribe to the same size bet system will say it is not a fair comparison. They will say that many of the wagers in the bankroll system are greater than 0. The argument is that if you wager more than 0 you will surely show larger profits.


Let’s look at this argument further. First we take the average of all bets in the illustration. Doing this will produce and average bet size of 5. If you use this bet and multiply this by the 60 winners, we get gross winning in the amount of ,298. We then do the same for the 40 losers (again do not forget the vigorish) and we get gross losses of ,019 for a net profit of ,280. This is better but still falls short of the ,485 net winnings we experience using the percentage of bankroll system. Another problem with this argument is that it is impossible to determine an average of previous bets because the bet have not yet been made. Since we do not have a crystal ball its impossible to do this.


In order to make money in sports betting, you must look at it as an investment. This separates the successful gambler from the “hard luck” loser. Gambling must be thought of as investment such as the stock market. Sports betting is a grind, do not expect to make a killing overnight. People who bet large amounts either to recoup losses or to make large sums in a short period of time may have a gambling problem. If this is you and you think you may have a problem, please go to the official gamblers anonymous site and see if you are in need of help.


Initial Equity 10,000

Winning Probability 60% total $ bets 20,497

Total Trials 100 Ave. bet 205

Amount of Profits + 12,452 60 win 12,298

Amount of Losses – 8,959 40 lose 9,019

Max. Runs positive 10 net 3,280

Max. Runs negative 5


Results

Equity 13,493

Profit/Loss + 3,493

Nr. of Profits 60.00 65%

Nr. of Losses 40.00 35%

Return + 68.1%

Max. Drawdown – 19.3%

MAR-Ratio 3.52

Average Profit/Loss + 35

Median Profit/Loss + 181


10000 Max. Bet Size in $ Bet Size in %

Trial# Profit/Loss Equity Drawdown – Return To Win / Risking of Current Equity

1 – 220 9780 – 2.2% – 2.2% 200 220 2%

2 + 196 9976 – 0.2% – 0.2% 196 215 2%

3 + 200 10176 0% + 1.8% 200 219 2%

4 – 224 9952 – 2.2% – 0.5% 204 224 2%

5 – 219 9733 – 4.4% – 2.7% 199 219 2%

6 + 195 9928 – 2.4% – 0.7% 195 214 2%

7 – 218 9710 – 4.6% – 2.9% 199 218 2%

8 – 214 9496 – 6.7% – 5.0% 194 214 2%

9 – 209 9287 – 8.7% – 7.1% 190 209 2%

10 – 204 9083 – 10.7% – 9.2% 186 204 2%

11 + 182 9265 – 9.0% – 7.4% 182 200 2%

12 – 204 9061 – 11.0% – 9.4% 185 204 2%

13 + 181 9242 – 9.2% – 7.6% 181 199 2%

14 – 203 9039 – 11.2% – 9.6% 185 203 2%

15 – 199 8840 – 13.1% – 11.6% 181 199 2%

16 – 194 8646 – 15.0% – 13.5% 177 194 2%

17 – 190 8456 – 16.9% – 15.4% 173 190 2%

18 – 186 8270 – 18.7% – 17.3% 169 186 2%

19 + 165 8435 – 17.1% – 15.7% 165 182 2%

20 + 169 8604 – 15.4% – 14.0% 169 186 2%

21 + 172 8776 – 13.8% – 12.2% 172 189 2%

22 – 193 8583 – 15.7% – 14.2% 176 193 2%

23 – 189 8394 – 17.5% – 16.1% 172 189 2%

24 – 185 8209 – 19.3% – 17.9% 168 185 2%

25 + 181 8390 – 17.6% – 16.1% 164 181 2%

26 + 185 8575 – 15.7% – 14.3% 168 185 2%

27 + 189 8764 – 13.9% – 12.4% 172 189 2%

28 – 193 8571 – 15.8% – 14.3% 175 193 2%

29 – 189 8382 – 17.6% – 16.2% 171 189 2%

30 + 168 8550 – 16.0% – 14.5% 168 184 2%

31 + 171 8721 – 14.3% – 12.8% 171 188 2%

32 + 174 8895 – 12.6% – 11.1% 174 192 2%

33 + 178 9073 – 10.8% – 9.3% 178 196 2%

34 – 200 8873 – 12.8% – 11.3% 181 200 2%

35 + 177 9050 – 11.1% – 9.5% 177 195 2%

36 – 199 8851 – 13.0% – 11.5% 181 199 2%

37 + 177 9028 – 11.3% – 9.7% 177 195 2%

38 + 181 9209 – 9.5% – 7.9% 181 199 2%

39 + 184 9393 – 7.7% – 6.1% 184 203 2%

40 + 188 9581 – 5.8% – 4.2% 188 207 2%

41 + 192 9773 – 4.0% – 2.3% 192 211 2%

42 + 195 9968 – 2.0% – 0.3% 195 215 2%

43 + 199 10167 – 0.1% + 1.7% 199 219 2%

44 + 203 10370 0% + 3.7% 203 224 2%

45 + 207 10577 0% + 5.8% 207 228 2%

46 + 212 10789 0% + 7.9% 212 233 2%

47 – 237 10552 – 2.2% + 5.5% 216 237 2%

48 – 232 10320 – 4.3% + 3.2% 211 232 2%

49 – 277 10043 – 6.9% + 0.4% 206 227 2%

50 + 201 10244 – 5.1% + 2.4% 201 221 2%

51 + 205 10449 – 3.2% + 4.5% 205 225 2%

52 – 230 10219 – 5.3% + 2.2% 209 230 2%

53 + 204 10423 – 3.4% + 4.2% 204 225 2%

54 – 229 10194 – 5.5% + 1.9% 208 229 2%

55 – 224 9970 – 7.6% – 0.3% 204 224 2%

56 + 199 10169 – 5.7% + 1.7% 199 219 2%

57 – 224 9945 – 7.8% – 0.5% 203 224 2%

58 – 219 9726 – 9.9% – 2.7% 199 219 2%

59 – 214 9512 – 11.8% – 4.9% 195 214 2%

60 + 190 9702 – 10.1% – 3.0% 190 209 2%

61 + 194 9896 – 8.3% – 1.0% 194 213 2%

62 + 198 10094 – 6.4% + 0.9% 198 218 2%

63 + 202 10296 – 4.6% + 3.0% 202 222 2%

64 – 227 10069 – 6.7% + 0.7% 206 227 2%

65 + 201 10270 – 4.8% + 2.7% 201 222 2%

66 + 205 10475 – 2.9% + 4.8% 205 226 2%

67 + 210 10685 – 1.0% + 6.9% 210 230 2%

68 + 214 10899 0% + 9.0% 214 235 2%

69 + 218 11117 0% + 11.2% 218 240 2%

70 + 222 11339 0% + 13.4% 222 245 2%

71 – 249 11090 – 2.2% + 10.9% 227 249 2%

72 – 244 10846 – 4.3% + 8.5% 222 244 2%

73 + 217 11063 – 2.4% + 10.6% 217 239 2%

74 – 243 10820 – 4.6% + 8.2% 221 243 2%

75 + 216 11036 – 2.7% + 10.4% 216 238 2%

76 + 221 11257 – 0.7% + 12.6% 221 243 2%

77 – 248 11009 – 2.9% + 10.1% 225 248 2%

78 – 242 10767 – 5.0% + 7.7% 220 242 2%

79 + 215 10982 – 3.1% + 9.8% 215 237 2%

80 + 220 11202 – 1.2% + 12.0% 220 242 2%

81 + 224 11426 0% + 14.3% 224 246 2%

82 + 229 11655 0% + 16.6% 229 251 2%

83 – 256 11399 – 2.2% + 14.0% 233 256 2%

84 + 228 11627 – 0.2% + 16.3% 228 251 2%

85 + 233 11860 0% + 18.6% 233 256 2%

86 + 237 12097 0% + 21.0% 237 261 2%

87 + 242 12339 0% + 23.4% 242 266 2%

88 + 247 12586 0% + 25.9% 247 271 2%

89 – 277 12309 – 2.2% + 23.1% 252 277 2%

90 – 271 12038 – 4.4% + 20.4% 246 271 2%

91 + 241 12279 – 2.4% + 22.8% 241 265 2%

92 + 246 12525 – 0.5% + 25.3% 246 270 2%

93 + 251 12776 0% + 27.8% 251 276 2%

94 + 256 13032 0% + 30.3% 256 281 2%

95 + 261 13293 0% + 32.9% 261 287 2%

96 – 292 13001 – 2.2% + 30.0% 266 292 2%

97 + 260 13261 – 0.2% + 32.6% 260 286 2%

98 – 292 12969 – 2.4% + 29.7% 265 292 2%

99 + 259 13228 – 0.5% + 32.3% 259 285 2%

100 + 265 13493 0% + 34.9% 265 291 2%


Copyright © 2006 Bull Market Sports Handicappers Inc – Reprints Accepted – One link must be active in the bio.

Find More Money Management Articles

Filed Under: Money Management Tagged With: ,

Adhd Systems for Money Management Can Make All the Difference

July 1, 2011 By lseasymo Leave a Comment

ADHD money management is a paradox. The first thing financial experts say is never let anyone else have control of your money. The next thing they say is that you need to follow a strict budget, avoid impulsive spending and save for the future.


As an adult with ADHD, you know that is a recipe for disaster. After all, they are asking you to:



pay attention to the details of a budget,


consistently micro-manage your finances to get out of debt,


eliminate impulsivity in your spending,


plan for the future,


organize all your bills and receipts,


and so on…



It flies in the face of the very challenges ADHD adults face. Just think about how most ADHD adults see money management.


Budgets are so boring! Most people don’t use them, let alone ADHD-ers. Getting out of debt is the slow drip of water torture, unless you’re planning on winning the lottery! (Not an effective plan, by the way.) Eliminating impulsivity in something that’s as much fun as spending money? Forget it! Oh, and plan for the future? When there is only “now” and “not now,” you’re not going to put money you could spend NOW for sometime that is NOT NOW! Sound familiar?


Harv Ecker, the well-known author of “Secrets of the Millionaire Mind,” and a popular speaker on the subject of personal finances tells people that if you count on getting rich enough to have someone else take care of your money, you won’t make it. He explains that you won’t get rich if you don’t learn to manage your money, and you won’t stay rich if you let someone else take control of your money.


For adults with ADHD money management is so difficult that many (I’d even guess most) ADHDers never learn how to do it effectively. Studies show that on average ADHDers earn ,000 less per year than non-ADHD-ers, and if you have trouble earning it, you’ll also having trouble keeping it. It doesn’t have to be that way though.


There are many ADHD-ers at the top of their game who excel in their careers, earning far above the average person with a comparable background. They’ve learned to work with their strengths and compensate for their weaknesses. Your challenge is to become one of them, and it is possible, but it won’t happen by itself.


Where can you learn ADHD strategies for money management? Personal financial management is rarely taught in schools, so unless you’ve sought out extra education, you’re following the only financial model you’ve seen. You manage your money just like your parents. If your parents are excellent financial managers, if they are wealthy and are living the life style you dream of living in the future, good for you. However, if your parents aren’t living the life you want, it’s time to change your approach.


You can learn personal money management through books, seminars and classes. Unfortunately, even when they teach personal money management, nothing is said about ADHD money management, and without specific ADHD strategies, you might never get out of debt let alone build your savings. In traditional approaches, the first step to getting a handle on your finances is to “prepare a budget,” and as you know, those words will make almost any ADHD adult shudder in fear.


While you can’t learn all about ADHD money management in one article (see here to learn more), to get your financial affairs in order, apply these three ADHD strategies. The three keys to ADHD money management are:
You must save for the future. At some point, your income may be interrupted. You may need or want to stop working, and if you have no source of income, you’ll need to survive on what you’ve saved for a rainy day. Your first priority must be to save up for that umbrella! If anyone counsels you to pay all your bills and put the rest into savings, run away! You already know there’s never any left to go into savings.


While you don’t want to delegate responsibility for your personal finances, you can make the decisions about your ADHD money management strategies and then set up systems to operate according to your wishes. When you drive a car, you decide to speed up and step on the gas. The car responds to your bidding, but it doesn’t demand that you get out and push it yourself. When you automate your payments, with Internet banking and other systems, you set the strategy so you’re not giving up control, but the system compensates for your ADHD challenges. You’ll save on late fees and interest charges by never forgetting a payment, and you’ll protect your credit rating too.


If you’re saving for the future and paying all your bills, any money that’s left is yours to play with! It’s now safe to be impulsive if you want. Even if you spend every penny left over, your financial success strategy is still executing perfectly. You can spend it all, or save for a big purchase like a dream vacation.


There are also excellent ADHD strategies you can put in place for special money management issues such as getting out of debt or buying a home. If money management is presenting a special challenge for you, you may want to consider ADHD coaching to ensure you’re working with someone who can help you set up systems that will meet your special ADHD needs. ADHD Money Management Coaching programs can help you put the right systems in place while you maintain control over your financial future.


While traditional approaches to managing personal finances may give you a headache, once you get an ADHD money management strategy established and the systems set up to make sure it’s executed as planned, things get really interesting. You see, once you stop concentrating on mundane tasks like paying bills, you can turn your attention to earning money. ADHD-ers actually have a good chance of outperforming the general population in terms of personal prosperity. Once you focus your energies on getting the most out of your strengths. Typically, an ADHD-er who chooses a career that plays to his or her strengths will excel far beyond the average person.


Feel free to reprint this article on your Web site or in your electronic or printed publication. If you wish to edit the article for length or style, please contact me prior to publishing. When publishing the article, simply include the short “about the author” by-line as shown.

 

Linda Walker is a professional ADHD Coach who works with ambitious passionate adults with Attention Deficit Disorder. She helps her clients break the glass ceiling of ADHD and unlock their true potential. She offers face-to-face and telephone coaching and workshops. You can visit her Web site at www.add-adhd-coaching.com Linda offers an ADHD Money Management Coaching Group program. Her program, ADHD Money Management: Finally Dollars and Sense, is designed to help participants not only learn about how to manage their finances the ADHD way, they also actually put in practice what they learn each week over 3 months.


It allows you to set it and forget it so that once you’ve set it in place you don’t have to review it constantly nor worry any more. Get out of debt, save up for retirement, stop fighting with your spouse about money, and stop overspending. To find out more follow this link.

Filed Under: Money Management Tagged With: , , , ,