PDF E-Book : Money Management Strategies for Serious Traders
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Money Management Strategies for Serious Traders
Forex Money Management eBooks Collection
various pdf ebooks about money management in forex.
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The Best Money Management Methods
In this of posting I’ll introduce to you some of the best money management methods that have been developped by Elder Alexander, the great forex and stock traders. In his book “Come to my trading room†in chapter 7 that labeled “Money Management Formulasâ€, he introduced the 2%-6% rules money management strategy.
Sharks and piranhas :
Elder said “The goal of money management is to accumulate equity by reducing losses on losing trades and maximizing gains on winning trades.†and he affirm that Everyone in the market (competitor traders and brokers) want to eat your money, they have two ways to eat your money:
1- A big single shark bite that wipe of all or the most of your capital.
2- A series of small piranhas bites that none of them is lethal alone but which together strip an account to the bone.
The 2%-6% rules is the Money Management method that protects you from the sharks and piranhas.
2% limit rule:
The first thing you should do to keep your balance away of the sharks is to limit your lose at any trade to 2% of your equity. If you have 100,000 USD in your trading account. So, you have to risk 100,000 x 2% = 2,000 USD in any of your trades. You have to set your stop loss to this level and you have not lose at any trade you make more than 2% of your equity. Some of professional traders use less than 2% but no more than 2%.
Whenever you make a loss or a profit you have to recalculate the 2% of the equity to know your new maximum risk per trade. For example if you made a profit trade and your account now is 110,000 USD, your maximum risk will be 2,200 USD. At the other hand if you made a loss and and your account now is 90,000 USD, your maximum risk will be 1,800 USD.
