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(B) fixed risk method
Anti-Martingale money management strategy
We will learn several anti-Martingale money management strategy the following:
- Fixed Risk Act
- Fixed capital method
- Method fixed ratio
- Fixed Units Act
- Williams Fixed Risk Act
- Fixed percentage method
- Fixed amplitude method
This article first-come, first learning management, fixed risk method.
Fixed Risk Act
Fixed capital risk management define a predetermined or fixed dollar risk per trade. The number of units of funds in US dollars fixed risk per trade, can be accessed through the initial account balance divided by the initial results it hoped to put the transaction. This is a simple formula, as follows:
Risk = fixed dollar account balance / unit amount of money
The main variable here is the account balance and the number of units of funds, or you may prefer to use the number of transactions
in this case, $ 20,000 starting account balance is divided into 40 units of the funds, derived dollar fixed risk $ 500. Correspondingly, equal to or less than $ 500 in transaction risk, you will be trading. To calculate the number of contracts you will want to trade, divided by the single transaction amount at risk (ie the difference between the market price and the stop price plus commission) with a fixed dollar risk, calculated using the short form below:
The number of contracts = fixed risk / trading risk
If the risk of a single transaction amount of $ 200, according to the general principles of money management, you can sign two trading contract (US $ 500 / US $ 200). The following table shows the number of fixed risk amount for the transaction may contract at $ 500.
In the fixed capital risk management strategy when applied to the results of foreign exchange transactions, the first question to ask is whether the law can achieve the fixed target venture capital fund management, reduce transaction ie loss, increase profits when trading. Unfortunately, in these two areas, fixed venture capital law can not be met. When you are suffering losses, fixed venture capital law you still want to invest $ 500 fixed; when you are trading in a landslide, you do not have the opportunity to reduce transaction contract. When losses, the risk of each transaction on your account bear an increase in fact means that your warehouse explosion risks have increased. When you are profitable, they do not allow you trade more contracts, the maximum number of contracts can be traded is two, which caused more damage, because the transaction is limited to $ 500, 195 trades had to be shelved or abandoned use, it can only profit of $ 151,538. This compared to net profit of 255,100 US dollars and that can be achieved in a single contract, gained little.
It can be adjusted according to the number of 40 transactions completed, adding a fixed amount of risk. You can once again put the account balance is divided into 40 units of funds, improve risk amount. In addition, you can even increase the funding to further reduce the number of units warehouse explosion risk. Either way, you will profit. More venture capital means you can conclude more transactions contract, and at the same time, you can reduce the risk of burst positions, because the number of units increased funding, this is not likely to cause explosive storage. I later fixed number of units method described is based on a fixed risk funds.
Although the law does not use fixed risk capital per trade of $ 500 to achieve proper money management, it still has some benefits. It allows traders to have a small amount of money to trade. As long as you have a valid approach, stable expectations, regardless of the particular situation of the 40 pencil continuous trading occurs, you are less likely to encounter financial warehouse explosion problem.
Another benefit of venture capital law is fixed, we can distinguish between different individuals of transaction risk. If the deal is too high a risk that it will not allow you to carry out the transaction, thereby reducing your position. Although fixed risk finance law on its capital management objectives is a failure, but risk management is helpful, positive.
