Today we will not analyze any specific strategy or trading tactics, but we will talk about money management. Have you ever thought about the fact that with rational money management, you can even achieve profitable trading from a losing strategy. How to do it? It’s very simple, first you need to stop thinking like everyone else and start thinking. All our problems, failures, self-doubt and fearslie in our psychology. As soon as we turn our minds around, we immediately begin to think not as those 95% of traders who constantly lose, but as those very 5% of individuals who strive for success in everything that they would not touch. The secrets of professional traders who have already passed the path of becoming from beginners to financial gurus will help you with this. In this article, we will dispel the most common misconceptions about money management rules and help you find financial freedom.
The most common misconceptions in Forex
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1. In each transaction, you need to risk no more than 3-5% of the deposit. In almost every strategy, they always write the same rule of money management.- the risk in each transaction should not exceed 1-3-5% of the deposit, in rare exceptions 10%, and this already refers to aggressive trading. But how can you make money if with such volumes the strategy brings on average 15-20% profit per month? It is clear that the majority of novice traders do not have such amounts that they can immediately deposit at least $ 10,000 into the account and withdraw a profit of $ 1,500 – 2,000 every month. In the best case scenario, you may have $ 1,000. But what will it bring you? No more than 150 – 200 dollars of profit, and even then not every month, since you already know that no strategy can guarantee stable profit every month, there will be unprofitable months. And many traders do not even have such an amount, they start trading from $ 500, or even from $ 100. And how long will it take to get to a decent level? Long years of painstaking work with unclear prospects. What then can we talk about financial freedom if trade does not bring positive results? Therefore, very often you can hear such questions from traders: “How to overclock a deposit”, but at the same time they think in a formulaic way, overestimate the risks and drain the deposit. We managed to develop a special methodology that allows you to overclock the deposit in a short time without much risk. We will share it with you absolutely free of charge, but a little later, and now let’s see what other misconceptions are encountered on but at the same time they think in a formulaic way, overestimate the risks and drain the deposit. We managed to develop a special methodology that allows you to overclock the deposit in a short time without much risk. We will share it with you absolutely free of charge, but a little later, and now let’s see what other misconceptions are encountered on but at the same time they think stereotyped, overestimate the risks and drain the deposit. We managed to develop a special methodology that allows you to overclock the deposit in a short time without much risk. We will share it with you absolutely free of charge, but a little later, and now let’s see what other misconceptions are encountered onForex in order not to make more such mistakes;
2. If you do not have the necessary capital to start trading, then trade on a cent account. This is a great recommendation for those traders who have no trading experience at all, or who are going to test a new strategy. But if you are already an experienced trader and you have a working strategy, but do not have enough funds for the initial capital, then how long will it take for you to earn them on a cent account ? It is better to follow our recommendations for overclocking the deposit, and in a year you can not only double or triple the amount of the initial investment, but even increase it 10 times;
3. With the help of intraday trading or scalping, you can accelerate the deposit much faster than during long-term strategies. Another misconception, which is very often instilled in novice traders by unscrupulous brokers, so that they drain their deposits faster. On scalping spent a lot of time and effort, while there is a large number of false alarms. During trading on daily charts, the total number of trades decreases, but the accuracy of signals increases, so you can filter out false signals and enter only high-quality trades. Even if you conclude only one deal per month, but reduce the percentage of unprofitable deals, you can still quickly accelerate your deposit using our method, a little later it will become clear to you “why”;
4. Take profit should be at least 2-3 times higher than stop loss. This is not entirely a delusion, this rule is taught by almost all supporters of classical trading, but you need to clarify a little. Everything is correct if take profitwill be equal to the stop loss, then it will take much more time to come out in plus when hitting a series of unprofitable trades. However, there is one “but”. It is necessary to strive for the take profit to be equal to at least eight stop losses, and the protective order itself does not exceed 15 “old” points. Then you can enter with a large volume without much risk, and a series of unprofitable trades can be quickly and easily won back. This can be achieved by trading in the medium term on daily charts. Now we will not dwell on specific strategies, but as an example we can cite the well-known Price Action trading system , and you can also read the article “The Best Daily Strategies for Investors” ;
5. It is possible to overclock the deposit only using the Martingale system, averaging methods and order grids. This is another misconception, it may work for a while, but very quickly leads to the drain of the deposit, so we do not recommend using these methods. In our strategy for overclocking a deposit, on the contrary, after the appearance of a losing trade, the volume of lots decreases, which allows us to stay afloat longer and avoid a quick drain of the deposit.
How to overclock a deposit?
Let’s go directly to the description of our deposit acceleration method. Let’s say your initial capital is $ 500. For a month of trading, the profitability of your strategy was 20% or $ 100. Of course, you can add the $ 100 earned to your initial capital, but this will have little effect on your profitability. We propose to act differently with the earned profit. Since you earned it, you will not be afraid of losing it, unlike your fixed capital. We will call this profit the risk deposit, that is, the deposit that we can donate to overclock. Now we need to take our $ 100 and divide by 3, that is, our risk in the trade will be approximately $ 34. This is an aggressive method, you can also divide $ 100 by $ 5 and risk $ 20 on the trade, all at your discretion.
So, you opened a trade with a stop loss of $ 34, and set your take profit equal to two stop losses. We have already said that you need to set a take profit equal to eight stop losses, but we will take a minimum value of two stop losses. If the trade is profitable, you will earn 34×2 = $ 68, or $ 168 in total. On the next trade, you will risk 168/3 = $ 56.
Now let’s look at an example of a losing trade. After your trade is closed by stop loss, the risk deposit will be 100 – 34 = 66 dollars. In the next trade, your risk will be 66/3 = 22 dollars, and so on after each losing trade, you divide the remaining amount of the deposit by three again until you win it back or your risk deposit approaches zero. As a result, you have about five attempts to recoup. And do not forget that your initial capital still remains intact, so after unsuccessful attempts to recoup, you can again switch to your classic trading with a risk of 3-5%.
Now let’s look at what it would be like if the next trade closed with a profit. After the loss, our risk deposit was $ 66 and the risk per trade was $ 22. In case of a successful transaction, our profit was 22 × 2 = 44 dollars, and the total amount of the risk deposit became 66 + 44 = 110 dollars. As you can see, we not only won back the losses, but also earned an additional $ 10. If our take profit was equal to one stop loss, then we would have to make two profitable trades in a row to recoup losses. Now imagine how easy it will be to win back losses when the take profit is equal to eight stop losses.
Next, we will look at how the overclocking of a deposit will look like according to our method. We will proceed from the assumption that a medium-term strategy is applied, which produces one high-quality signal per month, although this is not entirely true, because you can search for signals on several currency pairs. For convenience, we will have only profitable trades, but since we are talking about only one trade per month, we will assume that there were other trades, including unprofitable ones, which were covered by profitable positions. Our take profit will also be equal to two stop losses:
1 month – risk = 100/3 = $ 34 – profit = 34 × 2 = $ 68 – risk-deposit = 100 + 68 = $ 168;
2 month – risk = 168/3 = $ 56 – profit = 56 × 2 = $ 112 – risk-deposit = 168 + 112 = $ 280;
3 month – risk = 280/3 = $ 93 – profit = 93 × 2 = $ 186 – risk-deposit = 280 + 186 = $ 466;
4 month – risk = 466/3 = $ 155 – profit = 155 × 2 = $ 310 – risk-deposit = 466 + 310 = $ 776;
5 month – risk = 776/3 = $ 258 – profit = 258 × 2 = $ 516 – risk-deposit = 776 + 516 = $ 1,292;
6 month – risk = 1,292 / 3 = $ 430 – profit = 430 × 2 = $ 860 – risk-deposit = 1,292 + 860 = $ 2,152;
7 month – risk = 2,152 / 3 = $ 717 – profit = 717 × 2 = $ 1,434 – risk-deposit = 2,152 + 1,434 = $ 3,586;
8 month – risk = 3,586 / 3 = 1,195 $ – profit = 1,195 × 2 = 2,390 $ – risk-deposit = 3,586 + 2,390 = 5,976 $;
9 month – risk = 5 976/3 = 1 992 $ – profit = 1 992 × 2 = 3 984 $ – risk-deposit = 5 976 + 3 984 = 9 960 $;
10 month – risk = 9 960/3 = 3 320 $ – profit = 3 320 × 2 = 6 640 $ – risk-deposit = 9 960 + 6 640 = 16 600 $;
11 month – risk = 16 600/3 = 5 533 $ – profit = 5 533 × 2 = 11 066 $ – risk-deposit = 16 600 + 11 066 = 27 666 $;
12 month – risk = 27 666/3 = 9 222 $ – profit = 9 222 × 2 = 18 444 $ – risk-deposit = 27 666 + 18 444 = 46 110 $.
Do not be intimidated by such cosmic numbers, this is all real and quite achievable. In just a year, you can accelerate your deposit from $ 100 to almost $ 50,000. True, starting from the ninth month of trading according to our method, you may have two problems:
- Psychological problem. Since you are not used to trading with large volumes, it will be difficult for you at first to get over your fears. Imagine, at first you risked 34 dollars in one deal, and after nine months you are already risking almost 100,000 rubles. This is a very large amount, you can buy good things with it, so you are afraid to lose them. You can get out of this situation as follows – withdraw part of the amount in order to pamper yourself, and divide the other part of the deposit not by 3, but, say, by 5, reducing the risks;
- The problem with brokers. When you go for high betting volumes, you may have problems with brokers. In Russia and the CIS, there are very few brokers that bring transactions to the interbank market, these are mainly “kitchens”, that is, all transactions are “cooked” within the company, and the client’s profit is the broker’s losses. So here are all Russian brokerscan be conditionally divided into “large kitchens” and “small kitchens”. Therefore, try to choose large companies that have been on the market for a long time and have a good reputation. There is a chance that you will come across a “big kitchen” that will hedge your trades with a larger broker to avoid losses. If you come across a “small kitchen”, then it will cause you various obstacles, ranging from software glitches to canceled transactions and delays in payments. For convenience, you can use our rating of Forex brokers , where you will find only verified and reliable companies.
Thus, overclocking a deposit on Forex using our method is quite possible and has proven its effectiveness in practice. In the next articles, we will look at what strategies can be used to overclock a deposit with accurate entry signals, minimum stop losses and large take profits.
