• Money Management
  • How to apply
  • Calculate Stop Loss

Money – Management

  • Money management is the art of limiting the risk of a portfolio while maximizing its return
  • Studies have shown that up to 90% of the variance in a trader’s performance can be directly attributed to it
  • Money management is an essential element of success
  • It is not complicated, but it requires a lot of discipline
  • If you don’t use money management, you could have the best  trading system in the world, and still lose money.
  • With good money management practices, you could have a 50% accurate system and still earn great returns.

Elements of Money Management

  • A stop loss order placed for each Trade
  • A specific amount of money to risk in each trade
  • The maximum amount to risk over a given period

One trade should not matter

  • So what amount of risk should you be willing to take?
  • Never risk more than 1% to 3% of your total equity in any one trade
  • Keeping your risk small and constant is absolutely critical
  • Taking more aggressive risks could easily see your account go up as high as 20% in a day but…
  • “One trade should not matter”

Risk Tolerance

Risk Reward Trade Off


Values long term capital preservation more than the growth of returns – Accepts low risk for slow and steady growth of returns


Values medium term returns equally to capital protection –Accepts moderate risk for moderate growth of returns 


Values short term returns more than capital protection – Accepts high risk for short term extraordinary returns


Risk Profile

Position Sizing

  • Position sizing is an essential part of Money Management
  • Position sizing is the amount of equity invested on a trade
  • Finding the right balance is key to Money Management
  • Calculating correct position size (amount to trade)
  • Stop loss level in pips
  • Amount of money to risk

Calculating – Amount to Trade – Stocks

  • Lets’ say you have a possible double bottom and want to go long the share of Apple risking 1,000$
  • 100 shares requiring $15,000 as capital
  • Lets’ say you have a possible double top and want to short the stock of google risking 2,000$

Calculating – Amount to Trade – Forex

  • Lets’ say you have a possible double bottom on EURUSD and you want to go long risking 1,000$
  • 100.000 = 1 standard lot
  • Lets’ say you have a possible double top on GBPUSD and you want to short risking 500$
  • 200,000 = 2 standard lots
  • Risk/Reward Ratios
  • Trading Expectancy
  • Break Even Points 

Risk Reward Ratio - What it is

  • The risk to reward ratio shows how much money you are risking versus the potential reward on a trade
  • In order to attain the risk/reward of a trade, both the risk and profit potential of a trade must be defined
  • Risk is determined using a stop loss order
  • Reward is determined using a take profit order
  • A stop loss order is designed to limit an investor’s loss on a position
  • A profit target is used to establish an exit point should the trade move favorably

Risk Reward Ratio – Calculation

  • Lets say you have a possible double bottom and want to buy the Euro
  • You are risking 100 pips to make 150 pips
  • That’s a risk to reward ratio of 1 to 1.5

Risk to Reward - Examples

Expectancy - What it is

  • “Expectancy” is the average amount you can expect to win or lose per dollar at risk
  • Expectancy = (Pr. of Win * Av. Win) – (Pr. of Loss * Av. Loss)
  • We can also see how you could have a system that is accurate the majority of the time, but have a negative expectancy
  • Expectancy = (Pr. of Win * Av. Win) – (Pr. of Loss * Av. Loss)

Expectancy - Break even point

Expectancy - Human Nature

  • Most of us would feel better with a system that produced more winning trades than losing
  • The vast majority of people would have a lot of trouble with a low accuracy system
  • Because of our natural tendency to want to be right all of the time
  • The percentage of winning trades is not the most important factor in building a trading system

The Story of Desmond Leong

Desmond is your average trader. He started off blowing up 7 (or more.. lost count) accounts amounting to more than 500k, tested over 30 Expert Advisors (EAs) to no success and spent over 10k on stupid useless courses.

Today he runs an award winning trading team and provides market analysis and webinars to some of the largest brokers such as IC Markets, XM, Axi, Tickmill, FXCM, VantageFX, easyMarkets and more.

He now has a simple goal: Creating an army of traders who trade profitably together and keep each other accountable. Guiding them with the most comprehensive no-BS free tutorials so that no one ever needs to go through the pain he went through himself to become a profitable trader.

My Trading Strategy


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Trading in foreign exchange (“Forex”) on margins entails high risk and is not suitable for all investors. Past performance is not an indication of future results. In this case, as well, the high degree of leverage can act both against you and for you. Before you decide to invest in foreign exchange, you should carefully assess your investment objectives, experience, financial possibilities and willingness to take risks. There is a possibility that you will lose your initial investment partially or completely. Therefore, you should not invest any funds that you cannot afford to completely lose in a worst-case scenario. You should also be aware of all the risks associated with foreign exchange trading and contact an independent financial advisor in case of doubt.

Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved and seek independent advice if necessary.

Leverage enables traders, using a relatively small amount of money, to take a position that is many times the initial investment. This leverage effect can work both in your favour and to your detriment. The Forex market opens up the possibility to utilize this leverage effect to a high degree; at the same time, however, it also opens up the risk of experiencing high losses. Please trade with caution when you use leverage in trading or investing. Your risk is particularly not limited to the initial investment, but can quickly fall into a negative range in the event of strong movements, meaning you may be obligated to pay far more than your initial wager.