Capital Management of Foreign Exchange Margin Trading

As a speculator, the primary goal in the market is to obtain sustainable and stable profits, and the way to achieve this goal is to have different opinions and disagreements. Just like the Huashan faction in Xiaoao Jianghu has the battle of the air sword, there are also many debates in the field of speculation, such as the long-term and short-term battle, the battle against the trend, the battle of the wave Adam... These are the questions of the benevolent and the wise; speculation is not learning, it is not important whether it is a charlatan or a scientist, the key is the final result: profit or loss.

Although there are various conflicting opinions on analysis and forecasting and investment strategies, everyone has reached a rare consensus on capital management and risk control, believing that these two points are one of the most important factors for achieving long-term stable profits.

First, how to make your margin and the number of open positions form a ratio.

Before I get to this issue, I want to correct a misunderstanding about margin trading. Many people think that margin trading is riskier than real foreign exchange trading. I think this is a misunderstanding about margin trading. This concept equates the leverage in margin trading with the risk factor in the actual transaction. I think this understanding is biased.

A foreign exchange dealer provides investors with 200 times the capital leverage, which does not mean that the investor bears 200 times the investment risk in the transaction. The leverage ratio is not directly related to the transaction risk, but is linked to the amount of margin in the investor's trading account and the number of open positions!

For example, a foreign exchange dealer offers two kinds of margin accounts: mini account with a minimum opening amount of 10k, and the account bears $1 risk for every 1 point of exchange rate fluctuation when opening 10k positions; standard account with a minimum opening amount of 100k, and the account bears $10 risk for every 1 point of exchange rate fluctuation when opening 100k positions. The same is 100 times the leverage, why is the risk of mini account less than that of standard account? The reason lies in the number of open positions. The larger the number of positions opened, the greater the risk the account bears. I think elementary school students can understand this principle, but some friends who do real foreign exchange trading insist that the risk of margin foreign exchange is greater than that of real foreign exchange. I am speechless...

A lot of my friends who were new to the security deposit saw me and asked "Where are you?account opening"How much leverage in Belgium" and other questions, I usually give them the answer is "where to open an account, it doesn't matter how much leverage, the risk of investment mainly comes from yourself". An effective way to control risk is to learn to control yourself.

Back to the topic, how to match your margin and position, my advice is:

The margin is below $500, and the number of open positions must not exceed 10k.

The margin is below $5,000, and the number of open positions must not exceed 50k.

The margin is below $10,000, and the number of open positions cannot exceed 100k.

Second, the skills of building a position near the exchange rate falling to an important support level

(I) Difficulties:

1. Determine the strength of the support level.

2. If you buy strictly according to the support level, it is easy to miss the opportunity.

3. If you buy in advance, the price is often too high, causing the return-to-risk ratio to be out of balance and making it difficult to set a stop loss.

(2) Coping skills

1. If the strength of the support level is high, you can enter the venue in advance.

2. If the strength of the support level is moderate, you can enter the market in batches near the support level, break the support level to a certain extent, and when the price rebounds from the support level, up the ante, but the high up the ante position should be lighter and lighter (that is, the pyramid up the ante principle)

3. If the support level is weak, you can choose to continue watching.

III. Position building skills for prices to rise above important resistance levels

1. Determine the strength of the resistance level and the probability of breaking it before breaking it

2. If the probability is high, you can consider entering the venue in batches, such as:

A) 20% of the funds entered the market before breaking through the resistance level;

B) 20% of the funds enter the market after breaking through the resistance level by a certain margin (in accordance with the principle of effective breakthrough space);

C) 30% of the funds enter the market at the time of withdrawal confirmation after breaking the resistance level;

D) 30% of the funds continue to follow the pyramid principle during the rise of the exchange rate up the ante.

3. If the probability of breaking up is low, you can choose to wait and see, and enter the market after waiting for a breakthrough; such as

A) Buy after 30% of the funds break through

B) After 40% of the funds are withdrawn, they turn around again and buy after going up

C) 30% of the funds after the uptrend is confirmed according to the pyramid principle up the ante.

Fourth, the price rises to important resistance near the position squaring skills

(I) Difficulties

1. Determine whether it is a trend market or a range market.

2, premature positioning squaring makes it impossible to maximize profits;

3, close to the important resistance position squaring easy to miss the opportunity;

(2) Coping skills

1. If the resistance is weak, the probability of a breakthrough is relatively high, and the market is in a trend market

A) Approaching resistance level by 10%

B) 30% flat near the resistance level

C) Set a stop loss at a certain range below the resistance level, and the price falls back and reaches the stop loss level, which is flat by 60%.

D) If the stop price is not reached, and the resistance is broken, after an effective breakthrough is formed, according to the resistance building skills, 40% of the position squaring will be waiting for an opportunity to make up.

2. If the resistance level is strong and the market is in a range market

A) Approaching resistance level by 30%

B) Reach 40% of the resistance level

C) Set a stop loss at a certain range below the resistance level, and the price falls back and reaches the stop loss level, which is flat by 30%.

D) If the stop price is not reached, and the resistance is broken, after an effective breakthrough is formed, according to the resistance building skills, 40% of the position squaring will be waiting for an opportunity to make up.

Five, stop loss setting skills

1. Determine the characteristics of the market, whether it belongs to a trend market or a range market.

2. A good stop-loss price is based on a good opening price.

3. In an uptrend operation, the stop loss can be moderately relaxed.

4. For positions with a relatively large probability of increase, the stop loss margin can be appropriately relaxed.

5. The stop loss margin for positions in the range market can be relaxed.

6. During the decline, the contrarian stop loss range should not be too wide.