Author: Cynthia Macy

Money management is the most important and overlooked subject in trading!

In my opinion, the best money management system for Forex/Futures traders is outlined in great detail in Ryan Jones’ book The Trading Game: Playing by the Numbers to Make Millions. In this book, he teaches ‘Fixed Ratio’ money
management. This method, he argues, will help any trading system as long as it is profitable over time.

This is how to put the fixed ratio money management system into practice:

1. Start with the total number of dollars in your trading account. For example let’s say it’s 1000 USD.

2. Now pick how many pips profit you need to achieve before you trade with more lots. Let’s say 200 pips (10 pips/day for 20 trading days in a month average).

3. Now start trading .1 mini lots (which is profit/loss 1 USD). You would only increase to .2 lots after gaining 200 pips. When you gain 200 more pips profit you would trade .3 lots etc…

4.Here is an example of how fixed ratio trading would work:

Month 1: $1000 + (200 pips x .1 lot = $200 ) Total: $1200

You start with $1000 in your trading account and after 1 month of trading you gain 200 pips profit trading .1 lots. You now have $1200 in your trading account. You are now at the next level. If your account balance falls below $1200 then you will go back to trading .1 lots.

Month 2: $1200 + (200 pips x .2 lots = $400) Total: $1600

You now start month two with $1200 and gain 200 pips profit trading .2 lots. You now have $1600 in your trading account. You are now on the next level. If your account falls below $1600 then you will go back to trading .2 lots.

Month 3: $1600 + (200 pips x .3 lots = $600) Total: $2200

You now start month three with $1600 and gain 200 pips profit trading .3 lots. You now have $2200 in your trading account. You are now on the next level. If your account falls below $2200 then you will go back to trading .3 lots.

Month 4: $2200 + (200 pips x .4 lots = $800) Total: $3000
You now start month four with $2200 and gain 200 pips profit trading .4 lots. You now have $3000 in your trading account. You are now on the next level. If your account falls below $3000 then you will go back to trading .4 lots.

Month 5: $3000 + (200 pips x .5 lots = $1000) Total: $4000

You now start month four with $3000 and gain 200 pips profit trading .5 lots. You now have $4000 in your trading account. You are now on the next level. If your account falls below $4000 then you will go back to trading .5 lots.

RESULTS:

Month 6: $4000 + (200 pips x .6 lots = $1200) Total: $5200
Month 7: $5200 + (200 pips x .7 lots = $1400) Total: $6600
Month 8: $6600 + (200 pips x .8 lots = $1600) Total: $8200
Month 9: $8200 + (200 pips x .9 lots = $1800) Total: $10000
Month 10:$10,000 + (200 pips x 1 lot = $2000) Total: $12000

Notice that gaining an average of 10 pips a day, along with fixed ratio money management helps your equity grow asymmetrically. Your $1000 turned into $12,000 in 10 months!

Notice that your trading system doesn’t have to always hit a home run, you simply need to average 10 pips/day in this example.

If you wanted to be more conservative than the above example, you could simply add more pips profit in the formula. For example you could only increase number of lots traded after gaining 400 pips instead of 200 pips like in my example. This would mean slower growth. Try setting up a fixed ratio money management plan before you start your next live trade!

Author: Sharon White

The weight of articles today remain opposed to the use of capital controls both in the long-term as well as the short-term despite the fact that more countries are now considering this type of economic policy. However, the recent imposition of capital controls in Malaysia, and the arguable success of such controls, has now led a few economists to come out in favour of this once universally discredited policy. Nevertheless, even those who view capital controls as having some value, caution against their prolonged and expansive use. The answer to whether or not capital controls are appropriate tools for protecting and facilitating the recovery of economies during crisis can only be answered when the extent and nature of such controls are determined with specificity along with the subject country’s economic position. Identical capital controls are not likely to be appropriate for two separate countries in two separate stages of economic development. Therefore, before a determination can be made as to whether or not capital controls are appropriate in a given situation, many factors must be considered concerning both the country and measures being proposed. The economy has now developed to a point that makes such extensive bureaucratic intervention, which necessarily accompanies capital controls, a greater burden than the minimal short-term good that accompanies it. Nevertheless, capital controls have not always been viewed as such opponents to a healthy economy.

Author: Marco Terry

Do you own a business? If you are like most business owners, you probably have a lot of responsibilities. First and foremost, you have to meet payroll. Every time. You also need to pay rent and suppliers - on time. All this requires working capital.

However, if you are selling products or services to commercial clients or to the government, you are probably painfully aware that they can take as many as 60 days to pay their invoices. Why? Because if you want their business you have to conform to their terms. There is no other way around it.

But this also leads to an impossible situation. You have bills that need to be paid quickly but customers that want to pay slowly. Unless you have a lot of money in the bank, it’s not a sustainable situation. Sooner or later you’ll miss payroll, delay a supplier payment, or turn a large opportunity away.

The solution is simple. You just need working capital. One way to get working capital is to get a business loan. However, business loans are hard to get and can prove to be inflexible. A better solution is to factor your invoices.

Factoring, or invoice factoring as it is most commonly known, is a type of business financing that is ideal for owners who cannot wait up to 60 days to get their invoices paid. It provides you with the necessary working capital to pay rent, suppliers and meet payroll. And, as opposed to a business loan, factoring is easy to get.