The management principles which not only protect us, but ultimately we are giving our profitability. If you do not believe me, you think that "gambling money to eat" just one of the rich ... to do.
People always come to Las Vegas to gamble in the hope to earn the biggest profits, and the fact that many people have won. Such a question is how casinos can earn money if too many people win such large amounts?
This section is one of the most important parts you will learn about Forex trading.
Why is it important? Oh, we're in a time of instant active trading to earn money males, and to earn money, we have to learn how to manage it. Ironically, this is one part that is often overlooked in the transaction process. Many traders are only concerned immediately engage in transactions that do not pay attention to the size of their account. They simply thought that they could lose money in a transaction, and they faced a critical bottleneck. This is limited to investors ... it's called gambling (gambling games for real money!).
When you trade without rules to manage money, you are participating in a gambling real money on food. you do not consider your long-term investment. Instead you are just looking for so-called "word to most dishes."
The principles of money management not only protect us, but ultimately we are giving our profitability. If you do not believe me, you think that "real money gambling" as a lead-in to get rich, then you should think about following this example:
People always come to Las Vegas to gamble in the hope to earn mon words to the most, and the reality is that many people have victory. Such a question is how casinos can earn money if too many people win such large amounts? The answer is that while everyone thinks he is winning big amount, but the result is still profitable casinos because they had obtained the money from the loser. That's where the phrase "decent ones always win" appears. The truth is that casinos are just very rich statisticians. They know that the end result would be the winner, not the player. Even if Joe Schmoe wins $ 100,000 in gambling machines, the casinos know that there will be more than 100 people who lost $ 1,000 and the interest amount will be returned to their pockets.
Here is a basic example of how statisticians earn money from the players. Even losing both the money, the casinos in these cases will know how to adjust to their loss. In fact this is the only way to make money management. If you learn how to adjust your losses, you will have the opportunity to earn profits.
You want to become a wealthy statistics, do not let yourself become a gambler because the end result you desire is "always a winner". So how do I become a rich statistician instead of a loser?
Acceptable level of loss (drawdown) and the maximum acceptable loss?
Thus we understand that money management will finally give us the money, but now I want to show you another side of this issue. What happens if you do not have guidelines for handling money?
Consider the following example:
Suppose you have $ 100,000 and you've lost lost $ 50,000. So how much was lost percentage of your account? The answer is 50%. Too simple, right? Now I will ask you is how much you will charge a percentage of the full $ 50,000 to $ 100,000? The answer is not more that 50% of 100% of your $ 50,000, the new record is $ 100,000. This is called drawdown. According to this example, we have a 50% drawdown.
There is a point in the above example it is very easy and very difficult losses to recoup. I know you're saying to yourself: "I'm not going to damage 50% of your account in a single transaction." Oh, of course I would not expect that.
However, what would happen if you lost 3,4 or even 10 times a transaction? That can not happen to you, right? Do you have a trading system won with 70%. Therefore there will be no loss you may suffer in all 10 deals! Oh, while you have a good trading system, take a look at the following example:
In the transaction, we are always looking for profit. That is the reason why traders develop their own trading systems. A trading system with 70% profitable sounds like we have a good profit too. But just because your trading system is only 70% profitability, you think that every transaction performed 100 you will get 7 wins in 10 deals?
Not sure! How do you know are 70 transactions in total transactions 100 will win? The answer is you do not know. You can damage the first 30 transactions and 70 transactions after the victory. It also gives you 70% profitable, but you wonder: "Will you still can continue if you have lost two of the first 30 trading?"
This is why money management is so important again. Nothing happens to your trading system, but in the end you will still lose. Even for the most career gamble that they see that their livelihoods are also bad at having lost the campaign and they still end up with the ability to win.
The reason is that gamblers good management practices apply to their capital because they know that they can not win every time they play forever. Instead, they only venture a small percentage of their money so that they can still continue to exist after the defeats.
That is what you must do when you are a trader. Only when the risk of a fraction of the total number of accounts for transactions so you can still survive after the defeat. Keep in mind that if you apply strict rules for capital management, you will become the owner of a casino and the end result, "you are the winner."
