June 13 (Tue): Nikkei 225 vs NASDAQ (Course: Fund Management Methods - methods you should not use ... -)

Good morning ⛅

Everyone becomes desperate in searching for a trading method, but

“Capital Management Method”are you using anything?

There are many capital management methods in the world.

・Fixed Lot Method：Always the same Lot

・XX% Rule：Limit risk per trade to XX%

・Martingale：If you lose, you increase the capital step by step

・Anti-Martingale：If you lose, you reduce your stake by half

・D'Alembert：When you win, raise the bet; when you lose, lower it

Well, there are various methods like that…

Fixed Lot MethodIsn’t that what you use???

“Three Ms of Investment”I’ve explained it many times, but here’s a quick review.

・Mental (60%)

・Money-Management (30%)

・Method (10%)

※ The items in parentheses indicate my own assessment of importance

Amateurs tend to search for a “holy grail” trading method.

But the importance in trading is only 10…

90% is often neglected.

Money-Management (capital management) is more important than any method.

What a trader can do in trading is only manage losses!

Without thinking deeply about such important thingsFixed Lot Methodto trade is

the way of a losing amateur trader???

Amateur traders look at profits,

professional traders look at risk.

From my experience watching many traders,

amateur traders

think, “If I pull XX lots for YY pips, how much will I make?”

and do not consider risk here, or they disregard it,

if the market moves against me by YY pips, how much loss will I incur?

They may not completely ignore this, but it isn’t on their mind.

Make this clear

With XX Lot until the stop-loss point the loss is △△ yen.

That’s what professional traders understand.

So what I’ve recommended in the salon is

2% Rule（? means 0.5% or 1% or ?）

Until the stop-loss point, if movement reverses,

manage so that the loss becomes 2% of trading assets.

That is it.

Now then…?

This is a table of how much profit you must take to return to the starting point when you incur a loss.

If the loss is 2%, you can roughly recover to break-even by about 2% profit.

Therefore2% Ruleis recommended.

Let’s look at actual amounts.

If you have a trading fund of 1,000,000 yen and incur a 2% lossloss,

1,000,000 yen × 0.02 ＝20,000 yen

So the balance becomes 1,000,000 yen − 20,000 yen ＝980,000 yen

From a balance of 980,000 yen, if you gain 2% in profit

980,000 yen × 0.02 ＝19,600 yen

Therefore the balance becomes 980,000 yen + 19,600 yen ＝999,600 yen

It’s approximately back to break-even.

However, what if you suffer a 50% loss…?

1,000,000 yen × 0.5 ＝500,000 yen

Therefore the balance is 1,000,000 yen − 500,000 yen ＝500,000 yen

To return to break-even…

With 500,000 yen of trading capital, you would need 500,000 yen of profit?

If you’re usually consistently earning, that’s one thing, but

amateur traders with more losses

how can you expect your capital to double?

Capital management is a very important part.

I plan to write more details in Part 3 “Trading Techniques,” but

before suffering a big lossplease take another look yourself?

(The following is limited to members.)