Forex trading 2019 TA/FA setups and discussion, page-83

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specgoldbug

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16/01/19

22:21

Post #: 37137357
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Originally posted by sharks37 ↑

Thanks for sharing that reference material Spec.
I have to say though that I totally disagree with that last article about how much capital is required to trade forex. Their main premise is that if you trade at 1% risk it must be 1% of the funds your account, i.e. If you fund an account with $500 and want to risk 1% of your capital per trade then you can only risk $5 per trade. I think that's complete nonsense.

I see see no reason why a trader needs to keep their entire equity capital in their trading account.
For one thing, I've discussed before the fact that broker accounts are not interest bearing so most of the funds sitting in a broker account is dead money (interest-wise). All that's required actually is sufficient funds to cover the maximum expected margin on open positions plus an amount of capital to cover the maximum drawdown.

The second issue is broker risk - if all your funds sit in a broker account what happens if they go bust? It happened again just recently with some NZ based broker (whose name escapes me). Why keep more money than necessary in a broker account? The only amount that's necessary to keep in a broker account is the funds to cover margin requirements and max drawdown, as I said above. Another way of thinking of that max drawdown is how much are you prepared to lose on that account.

To go back to the example I gave this morning, I am prepared to lose $1K per EA, so for each EA that I add to my portfolio I will put that $1K to cover my max drawdown plus another $1K to cover margin on open positions = $2K in the account for each EA I want to trade. I then choose my EA risk parameters so that the max drawdown is unlikely to hit $1K by allowing a buffer as I described this morning.
Cheers, Sharks

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Heya Sharks....$250 you are prepared to lose and dream (with analysis and conviction)...is all anyone needs in forex
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Forex trading 2019 TA/FA setups and discussion, page-83

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Bigtincan's Board backs Investcorp offer: Why a NASDAQ listing could be game-changing

Panic, paranoia, and gangland politics: HotCopper users react to Dubber's missing $26M

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Forex trading 2019 TA/FA setups and discussion, page-83

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