In the financial market, investors control trading risks through effective fund management strategies. Money management is a matter of life and death for investors in the market. Success without money management is accidental, but failure without money management is inevitable. Although money management cannot affect the success rate of a trade, it can significantly reduce the potential loss from a series of losing trades. Let's talk about some of the more popular money management methods.
Fixed position and lot size
This is probably the easiest and most popular method of money management. Investors only need to choose a fixed position size, and all subsequent transactions will use the same position regardless of the size of the stop loss and take profit.
The advantage of this method is that it is simple and user-friendly, suitable for any novice investor.
The downside of this method of money management can be the complete lack of money management.
Fixed account net percentage
Investors buy new orders according to a fixed percentage of the account net, which means that each time a position is opened, the investor needs to adjust the position size.
Conservative traders typically accept losses of 1-2% of their deposits, while aggressive traders can accept losses of up to 10% of their deposits.
The advantage of the fixed deposit percentage is that it takes into account increases in deposits due to a series of losing trades.
However, this approach has some disadvantages. If the number of profitable trades and losing trades is the same, our account will bear the loss.
martingale strategy
The martingale strategy is the most popular and controversial strategy in foreign exchange trading, and it is also a widely used strategy. It requires high leverage and capital utilization, and uses capital management to maximize transaction efficiency.
The principle of the martingale strategy is that in a certain game, every time you lose money, you will increase the bet by a multiple of 2 in the next game until you win. Assuming that the first bet is 1 unit of principal, then each bet when losing money in a row is: 1, 2, 4, 8, 16... until you win. In order to improve efficiency, the martingale strategy will increase the position in the future, and increase the position in the form of multiple positions, so as to obtain a relatively small retracement level point.
So the core of this strategy is to have enough money, or to be able to withstand the retracement loss until the last turn around.
The most efficient place to use the martingale strategy is the shock market. Using the martingale strategy is most afraid that when investors enter the market, the market is running in the opposite direction. According to Martingale's theory, because the pressure will increase in the future, it is very likely that all the funds in the account will be lost in the later stage of the loss.
Anti-Martingale Strategy
The anti-Martingale strategy is to increase the bet by a multiple of 2 and continue to bet on the same side every time you win money in a certain game, until the number of times you set a profit is reached, and then start betting from the beginning. For example, if the goal is to win 6 times in a row, the first bet is 1 unit. After the first bet wins, the second bet is 2 units on the same side, and so on. If you do not reach the set number of wins in a row, start over from the beginning and re-bet from 1 unit.
Assuming that in a fair bet size bet, the probability of opening big and small is 50% each time, then the probability of continuous big or continuous small starts to decrease from 50%. So at any point in time, using the anti-martingale strategy, the probability of winning 1 time is 50%, the probability of winning 2 times in a row is 25%, the probability of winning 3 times in a row is 12.5%, and the probability of winning 4 times in a row It is 6.25%, and so on. Using the anti-martingale strategy, as long as the bet loses money, no matter how many times it has won before, it must be re-bet from the bet of 1 unit. Similarly, it can be calculated that the probability of losing 4 times in a row is also 6.25%. Winning 4 times in a row: 1+2+4+8=15, losing 4 times in a row -1-1-1-1=-4. Winning 4 times in a row and losing 4 times in a row occur at the same probability point of 6.25%. At this same probability point, either win 15 units of bet or lose 4 units of bet. Looking at other probability points, the probability of winning 3 times in a row and losing 3 times in a row is 12.5%, so at this probability point, either win 1+2+4=7, or lose -1-1-1=-3. If there is a loss if the target number of profits is not reached, for example, the goal is to win 4 times in a row, if the target number of profits is not reached, start betting again from 1 unit. From the calculation of the loss, it can be clearly obtained that if the anti-Martingale strategy is adopted, no matter how many times the profit target is set, in the process of betting, as long as the total loss of the bet that fails to reach the target number of times is the first Amount of one bet. Suppose you bring 63 yuan to the casino to gamble, the initial bet amount is 1 yuan, and you operate with the anti-Martingale strategy. If you want to lose all the bets, you must be lucky enough to lose more than 63 times in a row, and the probability is 0. 0000000000000000108%. At a glance, the martingale strategy has a very high winning rate, almost making money without losing money, but in fact it hides a huge risk of bankruptcy, and the profit-loss ratio is very poor (each profit is 1 unit of bet, when continuous losses may lose all principal quickly). The anti-martingale strategy looks stupid and has a low winning rate, but the risk of bankruptcy is very small and the profit-loss ratio is superior. This is beyond the expectations of ordinary people. In the speculative market, the ideas of martingale strategy and anti martingale strategy are reflected in every speculator. For example, most people are used to increasing their positions at a loss. The more they lose, the heavier they increase their positions, and they hope to take it back. However, there are very few people who can resist large profits because of long-term or large-scale floating losses. , The willpower of ordinary people is already very weak, and the urgent desire to escape from a catastrophe will defeat most people. Similarly, due to the weakness of human nature, fewer people adopt the anti-martingale strategy. The strategy requires profit to increase the position, and as the profit increases, the position is continuously increased to the target number of times.
summary
Due to the uncertainty of the market, any transaction has certain risks. Before investors make a transaction, don't always calculate how much they can earn, but first ask themselves how much money and what percentage of loss they can bear, and use this to decide how much money they should invest in the transaction, and should set the stop loss position at how far away. The highest principle of money management is: even if the worst happens, the loss can be controlled within an acceptable range.
Add
