Practice Exercise #1 (Money Management Test on DEMO)


One month ago, we started this Money Management Exercise, on my Main Facebook Group.
The main ideas was the importance of the MM in trading, the risk and how this can be managed properly (read more here).

In case you want to do this exercise, follow the next steps:

1. Open a DEMO account = $10,000
2. Take a coin (yes a coin).
3. Establish which coin sides will give you the signals. E.q head = long, tail=short
4. Open 20 pairs on your platform
(only pairs for not ruining the margins requirement. e.q no gold/silver/oil/indices, etc)
5. Flip the coin for first pair.
6. Enter (market order) using 0.01 lots (0.1 for $100,000 account), SL = 30p, TP =90p
7. Go to the next pair and do the same entry technique, then the next...until 20 pairs
8. After having 20 opened positions, stop trading.
9. Let all the positions to run, untill SL/TP hit.
10. If any position is closed (TP/SL hit), on the next day, open a new trade by flipping the coin, again.
* Important note: Practice TEST on DEMO purpose, only!
I know it might sound crazy, but what I need you to see, is what really means to trade with a good MM strategy (+ medium R:R ratio 1:3) and no strategy at all (50-50% to be right, short/long, by flipping a coin).

Also, this way of doing "automated" trades, might help you, if you are the emotional type person (bad for trading). You will understand what really means trading by the rules.

Average results:

Initial account balance = $10,000

Total trades = 50-200 trades / week
Positive/Negative = 1/3-5 trades in profit, only
Total positive pips = 150-250p / week
Total positive profit = 1.5%-2.5% / week

Negative account balance = NONE / week


* Total no of trades (and profits) are related to the time invested in testing this strategy. Some traders couldn't monitor their trading platform whole days, due to their daily schedule, jobs, etc. So their closed positions were spot in the next day, only (to open a new trade / that pair). This decrease their total no of trades, pips and profits.


Conclusions:

As I expected, nobody had a negative account balance / week, by now. Ofcourse mathematicaly, this is possible, but rare (using math probabilities). But the Draw Down wont be higher than 5% ( Signals Providers, offer a DD of max 15%, usually)

And as you can see, by using a good MM and a very bad strategy, or none - flipping a coin is just luck - you can still trade profitable, as a beginner.

The profits, can't be considered "spectacular", thinking that we are using for this exercise a $10,000 account. But if we will remember that by trading Forex, 95% of the traders wipe out their accounts in less than 3 months... (some statistic data present this no even higher, close to 99%).
Also, by using an "automatic" strategy, reduce the time involved to your trading activity. Not to mention, the stress.

We will continue this exercise, to gather more statistic data. Meanwhile, I will recommend you, new exercises, by replacing this "strategy" (flipping the coin) with some real trading strategies. And we will upgrade, later on, the MM, as well.


Best Regards,
^^_Lord_Ice_^^
   

4 comments:

Blogger said...

I would like to suggest that you go with the most recommended Forex broker: AvaTrade.

aditi said...

Useful information for beginners in forex market has been discussed here. Traders must learn about market before beginning with trading.To trade safe they can consider market analysts recommendations on different trading tips , MCX Tips as well.

Unknown said...

money-managers are responsible for managing the securities portfolio of multiple clients on a daily basis.

Priyanka S said...

The strategy with the highest win rate that I have heard of is the London Close Strategy:
https://www.authenticfx.com/scalping-forex.html
Unfortunately for me the London close occurs when I’m sleeping, so I only traded this strategy for a relatively short period. However, I was very impressed with its accuracy. At the time its authors were claiming around 90% win rate, although I think that “baskets” particular trades.

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