Trading is like running a company. You need to know your financial strength and risk tolerance before you can decide how much leverage you can add and how to control your own risks.

The debt problem of Evergrande some time ago is essentially that the leverage is too large, which leads to the break of the capital chain. They are involved in too many things, but we are a nobody.

Yi Zhe, if this happens, we will end up with a short position.

Both futures and foreign exchange markets have their own high leverage. If reasonable fund management rules are not formulated and self-control ability is poor, it is likely to lose more and earn less in the market.

Even continuous explosion.

So money management is simply two points:

(1) How to reduce losses (risk control)

(2) How to earn more (profit distribution)

That is, when the transaction is in adversity, strictly control the amount of losses, so that the account is safe, there is no risk of explosion, and survive first; Then, when the transaction is good, rationally allocate positions and get more profits.

The specific operation is:

(1) What position is used for each transaction? When losing money, how much is the stop loss? When you make a profit, how much do you earn to play?

(2) The overall withdrawal risk control rules of the trading account seek to maximize profits on the premise of ensuring that the overall risk of the account is controllable.

2. Two ways to manage funds

There are two most common ways to use fund management:

(1) How to use the fixed stop loss amount

(2) Using the method of fixed position

These two methods mainly face the two most mainstream profit models in the trading system.

1 model: A trading system that gains a profit advantage by "success rate+profit-loss ratio" with a fixed stop loss method.

This trading system is generally a fixed active take profit. For example, all orders have a profit-loss ratio of 2: 1. As long as the success rate of the trading system is higher than 33%, the trading break-even can be achieved.

More than 33%, the trading system can be profitable. However, there is a major premise for profit, and the fund management method of fixed stop loss amount is adopted every time.

How to do it specifically? Let me give you an example.

For example, for an account with $65,438+0,000, each transaction uses a principal stop loss of 65,438+0% ($65,438+00,000 x $65,438+0% = $65,438+000), and the profit-loss ratio is set to 2: 65,438.

By the way, make 200. As long as the success rate of the trading system is higher than 33% and the trading system is adhered to, the overall transaction must be profitable.

At this point, traders will have questions. The space for each stop loss is different. How to ensure that the amount of each stop loss is 100 USD? This requires us to adjust each opening position according to the stop loss space.

Bit, in order to achieve each opening stop loss amount is fixed.

The calculation formula of position is: stop loss amount/stop loss space = position.

Look at the figure below, which is a schematic diagram of the calculated positions of two transactions.

The stop-loss space of this multi-order on the left in the figure is 155, and the stop-loss amount is 100, so the position is 100/ 155=0.64 lots.

The stop loss space of this empty order on the right in the figure is 120, and the stop loss amount is 100, so the position is 100/ 120=0.83 lots.

This trading method is to calculate the stop loss space before each opening, and calculate the position in advance according to the stop loss space.

note:

1: What proportion of positions is appropriate?

In the example, the principal of 1% is used as a fixed stop loss amount. Some traders will ask themselves in actual combat, how to determine the appropriate percentage? There are two key points.

A: According to the number of errors when the trading system goes down.

The more times, the smaller the fixed proportion of funds used. Otherwise, in actual combat, the account will suffer serious losses when it encounters a system decline, which will affect the transaction. If the frequency is small, you can use offset.

B: according to the risk preference of traders.

Some people are timid, panic if they lose a little, and have no execution if they are afraid, so they should use small positions; On the contrary, some people have a good mentality and a large withdrawal amount, but they still maintain a healthy mentality.

Kang, with execution, can use a big position.

2. There will be endless positions in actual combat, and there will be some flexibility in actual combat.

For example, in the above example,100/155 = 0.6451,positions can be used in actual combat. In this example, I used 0.64 hands.

Good money management can make your trading system stable and profitable.