‘Fixed Ratio’ Money Management
Money management is the most important and overlooked subject in trading!
In my opinion, the best money management system for Forex/Futures traders is outlined in great detail in Ryan Jones’ book The Trading Game: Playing by the Numbers to Make Millions. In this book, he teaches ‘Fixed Ratio‘ money management. This method, he argues, will help any trading system as long as it is profitable over time.
This is how to put the fixed ratio money management system into practice:
1. Start with the total number of dollars in your trading account. For example let’s say it’s 1000 USD.
2. Now pick how many pips profit you need to achieve before you trade with more lots. Let’s say 200 pips (10 pips/day for 20 trading days in a month average).
3. Now start trading .A) mini lots (which is profit/loss 1 USD). You would only increase to .B) lots after gaining 200 pips. When you gain 200 more pips profit you would trade .3) lots etc…
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