Everyone is saying that if you want to trade for a living, you have to have a certain amount of money in your trading account. If you want to get a certain profit return every month, then this pressure to make a profit will greatly interfere with your decision-making ability. Even so, I think there are still many ways to achieve a good profit every month. method. One of those ways is wise and aggressive money management. Few people can explain this clearly. If you can, then I can only say that you are really researching and exploring, especially in mathematics and statistics. A method for rapid growth of small accounts. In addition, if you are good at Excel or Mathlab, it will be even better, it will help you a lot.
Life cannot be smooth sailing. In the financial market, returns and risks are directly proportional. Just like when you trade, it is impossible for a small account to make a lot of money under conservative risk management principles. Of course, nothing is impossible. You only need to grasp a few key strategic elements. This key element is your risk-benefit ratio and winning rate. When you figure this out, you can develop a risk management model to improve your trading results. In the following, I will give you an example of how to formulate a risk management model under the assumption of a trading strategy:
Assuming that our risk-return ratio (RRR) is 1:1.2 (that is, the average loss per order for loss orders is 1 unit, but the average profit for each order is 1.2 units), and the winning rate is 60% (that is, the number of profitable orders accounts for 60% of all orders) , the number of loss orders accounts for 40%), in this case, a large amount of wealth will appear in your account in a short time. If we make 10 orders per week on average, and 6 of them are profitable, then the weekly profit is 6*1.2=7.2 units. At the same time, 4 orders are loss-making, and the weekly loss is 4*1=4 units. It can be concluded that the weekly net profit is 3.2 units, so the monthly net profit is 3.2*4=12.8 units. If 1 unit represents 1% of your account funds, then your monthly net profit margin is 12.8%, if your initial funds are 10,000 US dollars, if you grow at this rate, your account funds will quickly become A considerable amount of wealth is enough to allow you to live a life of financial freedom.
However, most of us can't afford $10,000 and don't know how to use that money to achieve financial freedom. For most of us, $10,000 is a large amount of money. This may be our life-saving savings deposit. Would it be too risky to use this money to trade? Should we try to invest only 200 US dollars, because this is within the risk tolerance range of most people, and then use aggressive fund management strategies to increase the account funds to 10,000 US dollars, and then strengthen risk management, and then establish a Stable income strategy? There's no reason not to, unless you really have $10,000 to spare and you're a really good trader.
The higher your win rate, the more aggressive your money management strategy can be. No matter which strategy you use to trade, I oppose setting the risk-reward ratio to 1:1, because it is very simple, your average profit per order must be greater than the average loss per order, otherwise, you will never make money.
Now, you have to use some software (such as Edgewonk) to predict your future trading performance, you will see the changes in your account funds curve, and then you have to constantly test your trading system, constantly adjust, and finally let your The funding curve is steadily rising. Of course, your capital curve may have a certain retracement, or it may fluctuate continuously, with ups and downs, like waves.
You can allocate your portfolio risk depending on how much risk you can take and how well you manage it. Diversification of investment risks is conducive to maximizing investment returns, and every transaction you make should diversify investment risks. However, if you want your small account to grow quickly, you can't afford to stick to a rut.
Would you believe me if I told you that you can spend 1/4 of your account funds on every transaction? You won't believe it. In addition, it is very important that when you make the next trade, you must take out 1/4 of your capital to trade again. Suppose our initial capital is 200 US dollars, then we set the risk limit of the first transaction to 50 US dollars, and the result is a loss, losing 50 US dollars, leaving 150 US dollars, but you must also take out 50 US dollars in the next transaction US dollars to trade, so as to make up for your previous losses. It all depends on the winning rate. If we have a continuous loss, we will lose all our funds soon. This involves a mathematical problem. What is the probability of a continuous loss? Has there ever been a similar situation in history?
First of all, we need to determine how much leverage the broker provides us with. Some brokers provide leverage as high as 500:1, so we assume that the leverage ratio we trade is 500:1. This means that our own funds of 200 US dollars can leverage 100,000 US dollars of funds (200*500=100,000). In currency trading, we can make a standard lot of EUR/USD orders (1 standard hand EUR/USD The contract value was exactly $100,000). After the leverage is determined, we can determine our maximum position size. Sometimes when our account funds are insufficient, the broker will ask for a margin call.
Next, we have to learn to set a stop loss. The less our principal, the smaller the stop loss distance should be. If we set the maximum risk amount (that is, the maximum loss amount) of each transaction to 50 US dollars, then the maximum stop loss distance is 5 points, because the value of one point of exchange rate fluctuation is 10 US dollars. Therefore, the larger the stop loss distance you set, the greater the risk limit of each order, and the greater the threat to your principal.
The next thing to look at is win and loss ratios. Assuming that the winning rate is 60%, 6 out of every 10 transactions are profitable (there is historical data to support this point of view, not a number assumed at random). If you lose $50 per order, then lose six times in a row, which is $300, then your account is basically lost, so you have to reduce your risk limit a little. Assuming a risk limit of $20 per trade (10% of the account funds), we have enough risk tolerance for six or seven consecutive losses.
Now, I choose to risk $20 per trade, and we won't change our position size until the account doubles. When the account fund grows to $400, you can increase the risk limit of each order to $40, when the account increases to $800, you can set the risk limit to $80, and so on. Or you can take a more conservative approach and withdraw $200 when the account doubles to $400, withdraw $400 when the account doubles to $800, and so on. After using this method to withdraw cash twice, it can play a role in protecting funds, and you will never worry about bankruptcy.
Looking back at the beginning, the winning rate was set at 60%, the risk-benefit ratio was set at 1:1.2, 10 transactions per week, and a monthly net profit of 12.8 units, which means that the account would double every Thursday times. Of course, you may also lose money, but once you master the correct method and control the risk, you will naturally make a lot of money. Because your principal is too small, you have to adopt aggressive fund management strategies, but at the same time, the risk will also increase, and you are likely to lose your position. But if you catch a good profit opportunity, then you can make a lot of money. After all, you only lose $200. This will not directly affect your life security for you. You don’t need Risk your life savings.
It is very important to understand that this aggressive trading strategy is not a long-term solution, it just helps you more likely to achieve your wealth goals. You should also properly control the risk, don't feel that losing $200 is like losing everything, it's no big deal. Our emotional capital is as important as money, so learn to preserve your emotional capital.
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