Money management strategy is necessary to determine the amount of gains and losses in order not to lose more than you had and there are a lot of such strategies. You may choose the strategy suitable to your particular system or one of the more common techniques described below: 1. Fixed Percentage of Capital
It is a very popular instrument when traders determine percentage of their capital which will take part in trading. Usually they use no more than 2% of their capital in any one trade. 2. Optimal Fixed Fraction
This system uses the results of previous trades to define the optimal value for fixed fraction (the amount of capital to be traded per one trade) which help to gain the highest profit. 3. The Kelly Criterion
J. Kelly developed equalization helping to calculate the percentage of the capital that will take part in one trade. This method is based on the number of winning and losing trades over a period of time recorded by your trading system. 4. Adding contracts in a trend
Adding contracts as the trend develops is a good way of increasing your profits and preserving your capital during trend trading.
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