Money Management

ITS TIME TO GET MORE OUT OF LIFE

www.sm-forex.com

(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management

This is the crux of the whole Workshop Failure to employ sound money management principles will bust you no matter how good a trader you are!
(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management

Never risk more than 3% of your equity on any trade This is not a get rich quick scheme Protect your Equity at all costs!
(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management

(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management - Drawdown

If you have an equity pot of 10,000 and you lose 5,000 then you have a 50% drawdown It is easy to lose money and hard to get it back
(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management - Drawdown

(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management - Drawdown

Typical Novice Scenario:

Account size; 5,000 Position Size: 10 per Pip Risk: 30 Pip Stop Loss = 300 = 6% First 2 trades win for profit of 12%. Greed and overconfidence makes you increase your risk Next 5 trades lose at 15 per Pip = 2,250 losses Available Equity: 5,600 - 2,250 = 3,350 Total Drawdown: 33%
(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management Stop Size
Available Equity: Risk: 5,000 3% = 150 10,000 3% = 300

If your Stop Loss size is 30 Pips then the maximum trade position is 150/30 = 5 a Pip 300/30 = 10 a Pip
(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management Stop Size

The 3% rule is an absolute maximum. Professional traders use less!! Psychologically you can accept your losses better when they are small
(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Leverage and Margin

Gearing or leverage is the power to control a lot with just a little. With Forex trading $1,000 in your account can control a position value of $100,000!
(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Leverage and Margin

A Standard Lot - $1,000 controls $100,000. 1 pip = $10 A Mini Lot - $100 controls $10,000. 1 pip = $1

(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Leverage and Margin Margin is nothing more than the money that the broker requires you to maintain in your account before he will lend you money to trade. When the broker closes your trade because you don t have enough margin the term used is a Margin Call.
(C) Copyright 2006 Stephen Margison www.sm-forex.com

The Forex Codes

Money Management

It is desirable to trade when you have a high risk to reward ratio. The higher the ratio, the less you have to be right
(C) Copyright 2006 Stephen Margison www.sm-forex.com

Money Management
ITS TIME TO GET MORE OUT OF LIFE

www.sm-forex.com

(C) Copyright 2006 Stephen Margison www.sm-forex.com