Money management strategies- what is better?

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Hi,

I am trying to define which of the following two major strategies is better:

1. Using a system with medium winning rate (lets say for the example, something around 40%), with a high TP/SL rate (for the example, 3:1).
2. Using a system with high winning rate (lets say over 90%) with low TP/SL rate (lets say 1:8).

The first is the traditional way of manual traders, and the second is familiar with robots.

I would like to hear some opinions about it, which is better and why?

 
oilfxpro:
no 1 , the strategy is more likely to survive different market conditions. the second will not survive high volatility , and you will be stopped out frequently,especially if you use bucketshops running prices all over the place

I agree. I guess that's one of the main reasons manual traders traditionally use it. I have 2 questions for you:
  • Can it be profitable using the second system only when you see there is non-volatile market?
  • What are bucketshops?
    • Thanks.
 
david wood:
I agree. I guess that's one of the main reasons manual traders traditionally use it. I have 2 questions for you:
  • Can it be profitable using the second system only when you see there is non-volatile market?
  • What are bucketshops?
    • Thanks.
 
bossxero:
Use OANDA and you should be ok.

What is OANDA?

 
oilfxpro:
Yes in low volatility set ups. Bucket shops are crooked brokers who hunt for your stops, if they are close they will give false data feeds. Dealing desk brokers -avoid them!

Thanks. For bucket shops I have a solution, software called "broker nightmare".
 
david wood:
What is OANDA?

They are broker. If you're new to Forex then they are a remarkably good broker as their flexible position sizing allows anyone to practice sensible money management and diversification even with the smallest of accounts.

Theyre a good broker for larger accounts to for the same reasons

Broker Nightmare will not address the issue of slippage in fast moving markets (if anything, it'll make the problem worse and your losses will be higher as you inevitably hold onto losing trades that the EA will refuse to close !)

 

Never trade the second strategy. This is a popular strategy used mainly by poor performance trading signals and scammy robots - in attempt to show good results that are only short-term.

In the long term such strategies fail.

 
zupcon:
Broker Nightmare will not address the issue of slippage in fast moving markets (if anything, it'll make the problem worse and your losses will be higher as you inevitably hold onto losing trades that the EA will refuse to close !)

Hi,

As far as I know it is supposed to solve the problem. Can you please explain how it makes it worse?

 
FXP:
Never trade the second strategy. This is a popular strategy used mainly by poor performance trading signals and scammy robots - in attempt to show good results that are only short-term. In the long term such strategies fail.
I know. That's why only robots use it as a main and only strategy (robots make profits for limited time anyway, so it makes sense to use a strategy that gives good results during this time).But can't I find a way to use it as a part of a bigger strategy? Say, use it only in horizontal ranges or something like this?
 

IMHO, trade in large time frame (four hour and above it) with number one money management is safe.

 
produsenpejuh:
IMHO, trade in large time frame (four hour and above it) with number one money management is safe.
I would even say too safe. But I think I am looking for something not necessarily that safe, that will make higher profits. Do you think that the second system is so bad I should not even try and find a way to use it?
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