Easy Money Management Rule To Follow

Hello all,

I just want to share with you an easy money management rule that you could follow:

Have a 5-2 stop strategy.

It means 5 wins or 2 losses. Whatever number you reach first, you stop trading for the day and you go for example on demo. So if you are for example on a 4-1 win trades and you lose the second trade, then it is 4-2 (2 losses) and you logging off from your live account so at the end of the month you still making slowly profits and not taking too much trades at all or blowing your account.

Also i would like to advise to dont use martingaling. In our education course we have ''Trade Splitting'', which is dividing the original amount before doubling up.

Kind Regards,

BSB Zen
(blueskybinary.com)

Comments

  • GihonGihon Posts: 36
    bsbZen said:

    Hello all,

    I just want to share with you an easy money management rule that you could follow:

    Have a 5-2 stop strategy.

    It means 5 wins or 2 losses. Whatever number you reach first, you stop trading for the day and you go for example on demo. So if you are for example on a 4-1 win trades and you lose the second trade, then it is 4-2 (2 losses) and you logging off from your live account so at the end of the month you still making slowly profits and not taking too much trades at all or blowing your account.

    Also i would like to advise to dont use martingaling. In our education course we have ''Trade Splitting'', which is dividing the original amount before doubling up.

    Kind Regards,

    BSB Zen
    (blueskybinary.com)

    Hello Zen,

    Thank you for the nugget!
    May I ask if a professional trader would do the same as you say?
    One can picture a trader guru seating in front of the monitors and making lots of money from morning till evening then driving home in a Porsche.
    ;-)
  • bsbZenbsbZen Posts: 84
    Hello Zen,

    Thank you for the nugget!
    May I ask if a professional trader would do the same as you say?
    One can picture a trader guru seating in front of the monitors and making lots of money from morning till evening then driving home in a Porsche.
    ;-)


    Hi Gihon,

    This is most likely more for peope who are start trading with binary options. Some professionals are using this money management rule as well, but some other professionals are trading for example in the morning and they have already a winning streak, then they take a break and come back later in around 2-3 hours or so to continue trading so your mind is clean again and ready to proceed trading. (This is in mine experience, maybe others are trading all day long, i think its up to the trader itself, but i prefer this)

    You need to be aware to dont sit all day long behind the computer and trading too many hours, as you will get less concentrated and not focust at all anymore. So in mine opinion taking a break while trading is extremely important to keep your mind sharp :).

    Also please note that too much confident (when you are on a winning streak and you want more) could causes ''over trading''. Same with too many losses (when you are on a losing streak and you want more) could also causes ''over trading''. So you need to find a balance with that.

    Kind Regards,

    BSB Zen

    blueskybinary.com

  • jamesnjamesn Posts: 27
    MONEY MANAGEMENT . For example, if you have an account with 1k in it, don't trade more than 50$ per trade or 5% of your account. That way you can simply enter your success rate and start making some CONSISTANT profits, regardless of your strategy, a good money management strategy is the key to success in any trading. Here is a list of some money management types.

    Type A) 1% of your account (low risk low reward) 1000 account

    10$ per trade

    10 trades per day

    70% success rate (7/10 ITM)

    7 x 10(80% payout) = 56$

    56$ - 3(10) = 26$

    26$ x 20 days in the month = 520$ or

    50% increase for the month.


    Money Management strategy

    Type B ) 2.5% per trade (medium risk good reward)

    1000 dollar account

    25$ per trade

    70% success rate

    7 x 25(80% payout) = 140$

    140 - 3(25) = 65$

    65$ x 20 days per month = 1300$ or

    130% account increase in one month.


    And finally Strategy

    Type C) not recommended for inexperienced traders (high risk high reward 5% per trade)

    1000$ account

    50$ per trade

    70% success rate

    7 x 50(80% payout) = 280

    280 - 3(50) = 130$ per day

    130 x 20 days in the month = $2600 or

    260% account increase.

    These formulas can be replaced with any account balance with a $250 account it is possible, however i would recommend starting with atleast 500 dollars when trading binaries as it is a tough climb up the mountain and if your inexperienced can lose your money pretty quickly.

    Kind regards
    Jamesn
  • ShaunRShaunR Posts: 61
    Hi BSB Zen and Jamesn

    I really like the approaches you presented here.

    I currently use Jamesn's - type A approach but I am intrigued by BSB Zen's 5-2 stop strategy, except trading 1% capital with that may take too long to enjoy the compounding of earnings. Time to give this more thought. What it certainly will do is ensure the trader retains a focus to take only the best entry signals to maximise the number of wins - a good thing, and then revert back to demo to practice, practice, practice.

    Shaun
  • GihonGihon Posts: 36
    Hello Guys,
    I was thinking to share with you something useful. Little insight on why you need to be careful when practicing with the demo.
    I am a professional roulette player, I like the challenge of outsmarting a computer or a well trained croupier in live casino. (Plus an intelligent electronic system which is operating behind the scenes...)
    I have 80 - 90% success ratio... However this doesn't make me automatically good in trading. (I will post something useful later on martingale and why do not rely on it in trading...)
    When playing online I count on the mistake of the programmer who doesn't knew a thing about my strategies. (some are my own inventions)
    Also that it can not be obvious that the system was set to eat your money. (I believe there are casinos that do not use any electronic manipulation in their roulette tables. Obviously some casinos use such...)
    In this case timing is key, that is to leave the game while ITM. (in the money).
    On the long run the computer always wins so you need to quit on time.
    What does this have to do with the demo account?
    In roulette timing and success rate are the keys and this is same with trading.
    Be careful when you practice with the demo because if you go soft on yourself you will repeat mistakes and learn them, you will practice mistakes all over again and in the demo it will appear as success, your numbers will keep going up, you will feel good and think you got it alright.
    Finally you go live and your world is turned upside down. Then if you do not give up you eventually find out you have to unlearn mistakes and correct them. This takes much more effort then learning the correct way from the very start!
    Now you ask what should you do?
    This could be a long post on that and I am not even the best to answer that, but one very strong and practical principal I give you.
    Forget how the numbers are spinning up in the demo, give yourself a hard challenge, what ever amount you enter into a position only count how many losses and how many wins you had. Keep records and analyze your performance. Forget the numbers! If it was a win by luck, count it as it was a lose. Keep going until safely you get 7 wins out of 10 before go live. If it almost closes OTM but eventually closes ITM just count it OTM.
    If you give yourself a harder challenge in the demo then what you shall eventually face when going live then you are using the demo the right way.
    If you go soft and do the opposite I promise you your bankroll will be blown away when going live plus you trained yourself things you need to unlearn to become successful.
    If you need to see the virtual money so much then do the following:
    Lose on purpose till there is only 100 usd left on your demo and bring it up from there to 1000 again by keeping the rules. (eg. money management, no martingale!) This way you force yourself into a situation where you can not afford mistakes, that's how you learn.
    Tell yourself you are not allowed to lose then keep the standard high.
    Good trading! ;-)
    I
  • DaisyDaisy Posts: 1
    Thank for your reviewing. I'm very interested in it.
  • GihonGihon Posts: 36
    You are welcome!
    Just few more lines.

    Martingale is dealing with odds, knowing that on a long (exponential) run you have no chance against the odds.
    When calculating odds mathematics use probability. (http://www.mathgoodies.com/lessons/vol6/intro_probability.html)
    Your binary trading either ends ITM or OTM based on your prediction of the market trend. (call or put)
    When you decide using Martingale without good confidence of your understanding trends and technical analysis or indicators better you switch of reasoning and keep going as put, call, put, call, put, call only changing the amount of your bet, however I advise you to spend short time in the trading like this and quit for the day while having profit. (strategy based on 60 sec time frames, entering one position in every 60 sec)
    Because of the nature of Martingale focus on regaining your capital rather then gaining profit. However little profit you get don't let greed overcome you, Martingale will blow your account.
    Overall, I advise to try this with money you ready to lose for the sake of mastering Martingale for it is more of the metal strength to bring it to success and to train yourself psychologically for trading. (for the beginner)
    Martingale works well but only if you mastered the psychology.
    Remember, secret of Martingale's is to ride on winning trend then quit while still winning or recognize a losing trend and quit without hesitation still with profit. You do this when you mastered control over fear and greed.
    Too much fear or too much greed makes Martingale work against you it is not Martingale that is good or bad, it is your psychological readiness and strength which determines Martingale's success rate.
    Nice trading to all!
  • GihonGihon Posts: 36
    Oops, very important!
    Do not use Martingale below 85% payout at all the way I described above!
    (Exponential growth when the scissor opens is making huge difference with as little as 1% to start with! How about 5 or 10%!)
  • illodillod Posts: 49
    Martingale is actually a very dangerous strategy, and it's not my place to talk all about how many brokers have lost all their depo using this strategy. It's better to trade slowly in smaller lots.
  • bsbZenbsbZen Posts: 84
    illod said:

    Martingale is actually a very dangerous strategy, and it's not my place to talk all about how many brokers have lost all their depo using this strategy. It's better to trade slowly in smaller lots.

    I totally agree with you here Illod. use smaller sizes and trade 1 trade at a time.
  • BossBoss Posts: 76
    Well, everything seems to be simple and logical. But on the other hand it's not so simple to follow these rules. What if you entered and right away you made to unprofitalbe deals, and then the price turned around and you see a very favourable deal (not necessarily in options), what, will you tell me to close the terminal and just leave?
  • illodillod Posts: 49
    Boss, you can close the terminal and forget about trading all together. But why did you begin it then? I personally like to finish what I started. But in this case it's best to observe the price movement, instead of making an irrational decision.
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