Das Risiko ist das Seil, mit dem sich die meisten Forex Händler hängen. Noch, when this powerful tool is used carefully it greatly improves trading performance. Tatsächlich, prop traders can use maximum leverage for the best gains while also minimizing risk; below we’ll describe how Shaun does it.
Legacy risk-management strategies
Most traditional forex risk-management strategies are based on either limiting the amount of loss per trade or per market as a percentage of the account’s equity, or else tightening the parameters of trades going forward based on current losses.
Most traders typically increase or decrease their degree of leverage and position size according to wins or losses over some period of time.
Max leverage for minimum risk
Noch, even though it may seem counter-intuitive, savvy prop traders use maximum leverage to minimize risk. It’s true – Traders like Shaun use leverage to minimize at-risk capital while maximizing the compounding power of a series of winning trades while using a good system.
Wie? By limiting the amount of money allowed to accumulate in the brokerage account during the monthly trading cycle.
Throughout the month, a successful trading system harvests gains from the marketplace. Most traders allow those gains to accrue and use them to trade ever-larger lot sizes, even while using the original system and risk-management strategy. During a winning streak by any given system, the results can be impressive.
Natürlich, the trouble is that nearly all trading systems, if operated over a sufficient period of time, will “blow up.” When a system “blows up,” it can lose the majority of the trading account equity very quickly. Das heißt, the system fails to the extent that it either runs out of money or the original trading rules must be significantly modified.
Wie? By limiting the amount of money allowed to accumulate in the brokerage account during the monthly trading cycle.
Exacerbated by leverage, the occasional system failure is what keeps most traders poor. During a period of deep drawdown, weak traders go out of business because they lack trading capital. They haven’t put anything aside for “seed” funding.
Manage risk by sweeping excess cash from the account each month
To reduce both the technical risks of a trading system failure as well as the psychological pressure of facing drawdowns, Shaun and other prop traders “sweep” excess cash from trading accounts each winning month, so that the months’ beginning equity balances are all the same.
Keep the least amount of money with the broker
That limits the total risk in case of a blow up to a maximum of only a single month’s preset trading account limit. Gains from previous winning months are safely sequestered in a different account, away from the trading account.
“Prop shops” minimize risk under leverage
Proprietary trading firms generally use sophisticated risk-management systems to monitor individual risk management and prevent monthly drawdowns from exceeding threshold levels.
Everyone wants to make sure prop traders manage risks effectively while leveraging their own capital, as well as the firm’s money.
Risk every dime in the account, jeden Monat
When a system works well, traders like Shaun leverage their capital to maximize gains and trade the largest practical position size. The profits from a string of successful trades can accumulate exponentially.
Und, to ensure gains are protected, each month Shaun “sweeps” any gains from the trading account, reducing it to its predetermined par level. It’s critically important to pull profits on a regular basis, so they won’t be subject to loss.
Whenever a losing month does happen (and it will!), you top up your balance. The idea here is that instead of trading a $50,000 Konto, all of which is subject to loss, you only put something like $5,000 into an account. That’s money that you’re truly able to lose.
Are you happy if you lose it? Of course not. But as a risk-focused trader, you know that even if you lose the money, your financial situation shouldn’t be severely impacted.
$5,000 probably isn’t the exact number for you. Maybe it’s more. Maybe it’s less. The point is, once you know your max loss number, it’s a lot easier to kiss it goodbye and put it into the account. Dann, if you get the performance that you’re expecting from your trading system, the return on investment (ROI) can yield some eye popping numbers.
This chart is the Myfxbook verified performance of my trading account.
If you’d like to learn about pulling profits from your account and other prop trading tips, stay tuned for the next article in this series.