Money Management for Newbie

[ilia king]

I am going to start trading forex for real on fxcm with an account of £1000 - mini account. I am not going to be trading for the profit but for the experience. I have been testing different systems for weeks but I am not sure about money management, the minimum amount to lose £450 so should I trade with 30% of my capital and should I take a static profit or change it depending the trades.

Also what about the stop-losses?

I would appreciate any help

 

[JonnyT]

It sounds to me that you do not have a strategy or a plan so should not be trading.

£1000 is not enough.

JonnyT

 

[ilia king]

Jonny I do have a plan but I just want to trade with GBP 1000 for a bit, to experience some losses and some profit and then move the account size to GBP 20 000

 

[JonnyT]

The point is the smallest you can risk is £10 per pip

100 pips and you are wiped out.

I reckon 5 losers in a row max.

Last month I had 17 consequtive losers in a row. Such runs can and do happen for the vast majority of strategies.

JonnyT

 

[chump]

Johnny T,
Is that position size £10 a pip applicable to all platforms for currency trading?

Cheers

 

[Marc100]

JonnyT

"Last month I had 17 consequtive losers in a row."

Bugger you beat me!

Last month I had 9 losses in a row and naturally thought this was something of a record. I suppose I will have to try harder

Marcus.

 

[TheBramble]

IK - Anything more than 1% of total trading capital risked per trade is unacceptable (for me).

With a £1000 account I don't feel you are going to be able to effectively trade your chosen instrument.

If you want to trade with that amount (where £10 is your max risk per trade) - try one of the SBs that allow sub-£ per point bets.

I know most SBs aren't worth a light, but if it's just the experience you're after - why worry about the amounts traded or the method?

The other thing is, if you're only going in for the experience rather than the profit, you might be defeating the object of the exercise. When you trade, 'normally' you will (hopefully) firmly have the profit motivation in place - not just an objective, disinterested observer mentality.

I'd trade that £1000 with all the passion, control and discipline I'd expect to be using for an account 1000 times that size.

Just my thoughts.

 

[adrianallen99]

If you trade a mini forex account you only have to do contracts of 10k instead of 100k which It around £1 a point as opposed to £10

 

[TWI]

Good Luck

 

[bbmac]

Sorry to be the contrarian, but my personal trading style/system is to trade only hi probability/lo risk set ups so I can risk 5% of equity per trade. I have a lot of break even's and these not included achieve 80%+ winning trades to total trades (not including b/e's.) My longest losing run is 2 only beacuse if I do have a loss I am extra cautious and move up to a 15min or 30min chart for increased saftey/probability.

Our individual tolerances and styles are all different, but for a newbie however I would recommend no more than 2% of total trading equity to be risked per trade.

 

[BBB]

Brambles last point is the best advise here.
If you're just trading for 'experience' dont expect to win. You will only have a negative experience.

Jonny also made a good point about his string of losses. That why trading is tough- its the mental discipline. 1k wont afford you that discipline.

 

[goldfish]

If it's just the experience you're after then SB is the way to go, I'm not keen on it, but it would allow you to trade tax and hassle free with a small sum. Be advised that if you're just starting out then 'breaking even' would be doing well!

As for account management, one simple way is to work out your maximum potential loss in points before each trade and then assign 5% of your bank max on that amount. You'll place a different amount per tic depending on the market you're working on. You can then adjust that figure as your experience grows.

good luck!

 

[numspar]

Ilia. If you're going to trade forex with that amount,I would suggest opening an account with Oanda rather than FXCM. They have no minimum trade size(trade $1 increments) with up to 50:1 leverage. There spread is also lower than what the SB's offer on Forex (2-3 pips on majors).

www.oanda.com