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The document outlines a money management strategy for long-term trading, emphasizing the importance of risk management and maintaining a low drawdown. It suggests limiting trading allocation to 30% of total equity and focusing on high reward-to-risk setups while being patient for rare high-timeframe setups. Additionally, it highlights the significance of managing drawdown over seeking high-risk exposure to achieve consistent annual returns of 18%-25% for fund managers.

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crony2004
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4 views4 pages

13

The document outlines a money management strategy for long-term trading, emphasizing the importance of risk management and maintaining a low drawdown. It suggests limiting trading allocation to 30% of total equity and focusing on high reward-to-risk setups while being patient for rare high-timeframe setups. Additionally, it highlights the significance of managing drawdown over seeking high-risk exposure to achieve consistent annual returns of 18%-25% for fund managers.

Uploaded by

crony2004
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Money Management

This is teaching is based upon the idea to be a long-term trader.

HTF Analysis

The size of account is irrelevant. What’s important is the managing of risk. Ideally
you want to have less then 15% Drawdown/year.

Money Management 1
List of qualities that Investors look for:

If you want to become a large fund manager and manage money for
other people you have to build your foundation on a HTF.

You need to show a consistent equity curve with very little drawdown.
Steady increase > Large equity swings

Limit only 30% allocation to trading from total equity. If you have 100K
account, you should be using only 30K for trading.

If you risk low % per trade from 30% Equity, you will never be
overleveraged, no wild dips. By doing this you will always have spare
cash for new opportunities.

Ideally you want to have 1% per trade on 30% Equity. From 10K
account, you will be risking only 3K Equity and only $30 per trade.

You focus on 3:1 Reward to Risk or higher setups. On the HTF these are
quite large moves.

Why you have low risk, but high reward, allows for low accuracy, Win
Rate.

Less risk More room for setups.

Expectations

18%-25% is a handsome Annual Return for Funds.

Money Management 2
HTF Setups occur very rarely. You have to be patient while waiting for
something to form. Once you are in the trade, just hold it for couple of months
and let it play out.

You have to be okay and weather several days of drawdown. HTF Setup - HTF
Drawdown, HTF Profits. You have to get used to momentarily losing profits.

How to hedge? By using correlated or inversely correlated markets. 💎


Let’s say you have long-term Short positions on USDJPY. At some
point there will be a retracement against your open profits.

When that happens you can go and open new position Long on
EURUSD because they are inversely correlated.

As price Going up and running against your original short, you are
actually making money on the Long position on EURUSD.

When the retracement is over, you close the Long position and take
profits. As price starts dropping again on USDJPY, your short
position will start gaining profit again.

When doing Long-term trading you can limit your setups of the size of Stop
loss in terms of pips. For intraday trading 35 pips is good for stop loss.

For a Setup that requires 200 pips Stop loss, you need to be able to target
600 pips for 1:3RR.

With HTF Long-term trading you have to resist the urge to move stop loss to
BE too soon. You have to allow more time to pass.

Take off partials at logical targets and add them back retracements. For
example, if you are long, you take partials at Buy stops and add them back
on Internal FVG.

💎 Velocity is how fast you put your money to work. Intraday trading
allows you to get in and out very quickly and compound the equity
faster.

You have to be extremely patient with Long-term trading. There are not a lot
of setups. There are large periods of drawdown.

Money Management 3
There are 2 good position setups per year. If you are lucky and market
conditions are really symmetrical, you might get a 3rd.

2 trades per year. 3% gain on each = 6%. And you can even miss the lower
entry long and still gain 3%. What if you put 2% risk per trade?

Ideally you want to focus on managing drawdown instead of trying to


increase the risk exposure.

Fund managers are always on vacation, because they don’t take trades every
single day. They let other people money work for them.

Low frequency trading + High Odds potential setups + Very low risk = Easy
20% annual return and investors will love you.

Money Management 4

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