In applying a good money management generally there are
some money management techniques are often used by traders and proven can
provide traders with the ability to maintain profit of the capital even double it many times no matter the
trading account get loss but by using such techniques can restoring all of lost funds even be
able to make a Trade profit . Here
are some money management techniques commonly used are the following below :
1 . Martingale
Martingale is a strategy by doubling the
number of lots from the previous lot with the aim to
restore losses quickly through the multiplication of lot . Although this
technique can make you restore the loss of your funds quickly but this martingale
technique has a negative side on the use of lot . When double the trading lot automatically risk of will be greater
than before . That will sound good if we could win the order with
the position that touches the Take Profit point but what if Our Order touched the Stop
Loss then we will lose more . You can see an illustration of the technique
usage here : Martingale Technique
2 . Switching
Switching is a trading technique by changing
direction when loss experienced in
trader order with the assumption that the market trend has
changed and not walked in accordance with the analysis of the trader . For example a
trader making analysis and see the shooting star pattern then he take the conclusion that the trend will going down and try to take
the opportunity to short . But after a few hours then the price does not touch
on the take profit even as
if the market would be rise by making the hanging man pattern . Then at that time the
traders will take the initiative to change the order from Short becomes long
for anticipated losses . As shown in the image below :
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| Switching |
It is seen that after the price does not touch
a take profit but instead gives signs that the trend will change , the trader
can take the initiative to change the direction of the short order turn out to
be long so it can be in minimizing losses or even be turned into profit .
3 . Cut Loss
Cut loss technique is usually used by a trader
who rarely put a stop loss on any orders due to the assumption that the stop
loss just makes the loss comes
faster . Cut loss is done by closing the order that was made
with the assumption that if it not closed immediately the
order will cause greater losses . This technique is often
used by beginner traders because of lack of understanding the importance using stop loss
in money management .
4 . Averaging
Averaging is a money management technique by
performing repeated orders despite previous order has been closing in stop loss hitted in hope that the market will change direction in accordance with the
wishes of the trader . In using averaging techniques are needed high caution in
using this technique because the trader will fight against the trend in the
market so that the arrangements with a small risk and consistent is necessary and
wait from making order
until the price reaching in next saturation point so it is likely not possible
to continue the trend and change of trends will often occur at the saturation point.
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| Averaging |
5 . Hedging
Hedging is open two positions simultaneously
but with different directions . When doing this technique strength of our margins
will remain closed until one order . Hedging techniques will make one of the
orders we experienced of profit and the other experienced in loss so we need to be
careful when closing one
of them, loss or profit order I mean to avoid mistakes because we closing one order in the
wrong time when the trend still not changing.
Thus articles on money management in trading
techniques that I can give to you and hopefully this article can be useful .
Description: Forex Money Management Technique
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