Money management is very crucial for traders to regulate trade properly. This is the technique of expanding or declining the position size to reduce the loss and to achieve better returns. Traders are required to know about this because to fulfill the goal, people have to control their loss. But, many people do not know how to utilize this skill to secure the capital. Some businessmen do not afraid of countenancing loss and behave aggressively in the time of taking the risk. If they can take the step properly, they will able to make profits. In contrast, if they take the wrong steps, they will face destructive loss. On the other hand, many investors do not want to take risks to achieve their goals. As a consequence, they do less trading. This happens because of poor money management skills. So, investors should develop their skills. There are some tips for managing money properly. These are being discussed here.
The 2% Rule Technique
This is also called the anti-martingale money management method which depends on the account balance. According to this rule, traders need to take 2% risk of their capital per trade. Fresher should follow this as this focuses on reducing the risks which will help them to stay in the field. Mainly, conservative investors prefer this as they cannot able to afford more loss. The person who has a large account size, he or she can also apply the tip. The owner of a larger account does not need to take a high risk to accomplish the target. But, sometimes, this is tough to execute in the leveraged business field. People can also invest more capital if they think they can afford it. For beginners, this will be the right choice.
Fixed Fragmentary Method
The method is also called Fixed Fractional. This is applied to trade to one contract for every X amount of dollars of the capital. X can be bigger or smaller in number. For example, if a person opens trading one contract and in this time the X is $20,000. When this will be $40,000, he or she can increase the volume to two contracts or more than that. If the account size is small, the risk is low and the progress is slow. On the other hand, if the account size is large, the risk will be high and progress will be swift. The fixed fragmentary method is not going to be a big issue for the investors in the Mena region, if they chose Saxo Bank as their prime broker. Remember the fact, elite brokers will always help to ensure best trading environment.
Ideal f Method
The ideal f technique is called a mathematical method to find out f which mainly indicates the fraction. The strategy resolves for the optimal fraction from a provided set of business that will bring out more profits than any other fraction. By using this, people can make grow their capital potentially but this is dangerously risky. If a person is skilled in mathematics, this will better choice for him or her.
Reliable f Technique
Reliable f is a secure version of the ideal f strategy. According to this, the risk can be controllable but at the rate of geometric development. You can also apply this approach to managing money in the trading field.
Fixed Ration Method
Ryan Jones developed this theory which mainly emphasizes the process of money-making. Here, Delta is the variable that is identified by the maximum drawdown of the traders’ business plan. If the plan provides a big drawdown, the theorist suggests the delta will be half of the maximum drawdown. On the other hand, if the plan provides a low drawdown, the delta will be greater than the maximum drawdown. This is suitable for the person who has a small account. The advantage of applying this strategy is that this provides geometric development without risking a lot of money.