Simple money management fomula

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WL  = Worst Loss

R = % you want to risk

Bal = Balance 

TL = Lot to trade


Formula

(Bal  x  R) / WL   = TL 


ex)

your account is 5000

Risk is 5%

and Worst Loss is 200 


= proper lot size is 1.25 lot 


If you have 10 EA, each lot size is 0.12(1.25/10)


Good case:

1. If your money increase to 6000, TL is 1.5(6000*0.05/200). Your trading lot size has increased. 


Bad case: 

1. If your money decrease to 4000, TL is 1((4000*0.05)/200).

2. If you suffer new high Loss(300), TL is  0.83((5000*0.05)/300)).



There is a lot of money management in trading world(Kelly, optimal F, etc). But I think this method is the simplest and best. Because other methods are complicated to use.This is anti-martingale money management. If you want to bet a bigger size, you have to increase risk or increase money. 



source: The universal principles of successful trading (Brent Penfold)

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Kim Jae Youn:

your account is 5000

Risk is 5%

and Worst Loss is 200 

= proper lot size is 1.25 lot

Never risk more than a small percentage of your account, certainly less than 2% per trade, 6% total to the account. In code (MT4): Risk depends on your initial stop loss, lot size, and the value of the pair. It does not depend on margin and leverage.
  1. You place the stop where it needs to be — where the reason for the trade is no longer valid. E.g. trading a support bounce the stop goes below the support.
  2. AccountBalance * percent/100 = RISK = OrderLots * (|OrderOpenPrice - OrderStopLoss| * DeltaPerLot + CommissionPerLot) (Note OOP-OSL includes the spread, and DeltaPerLot is usually around $10/pip but it takes account of the exchange rates of the pair vs. your account currency.)
  3. Do NOT use TickValue by itself - DeltaPerLot and verify that MODE_TICKVALUE is returning a value in your deposit currency, as promised by the documentation, or whether it is returning a value in the instrument's base currency.
              MODE_TICKVALUE is not reliable on non-fx instruments with many brokers - MQL4 programming forum 2017.10.10
              Is there an universal solution for Tick value? - Currency Pairs - General - MQL5 programming forum 2018.02.11
              Lot value calculation off by a factor of 100 - MQL5 programming forum 2019.07.19
  4. You must normalize lots properly and check against min and max.
  5. You must also check FreeMargin to avoid stop out

Most pairs are worth about $10 per PIP. A $5 risk with a (very small) 5 PIP SL is $5/$10/5 or 0.1 Lots maximum.

 

@William Roeder


Thanks for the info.

I have noticed you have replied to multiple posts with this same comment.


How's about a coded example??


Thanks


A

 
Anwar Ben: How's about a coded example??

How about you do the algebra and code it and show us your result? Should take you two minutes.

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