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February 15, 2013

My Money Management System


I want to share with you the revolutionnary Money Management System (MMS) that I use when some market conditions are met.

It can be used in any strategy:
  • Swing Strategy
  • Daytrading
  • Scalping

It's based on hegde strategy but I have made some improvements and it became a great MMS.

One of the most important thing, is to not lose trades. I mean we have to reduce the risk to the minimum and maximize gains. We talk about the ratio Risk/Reward. You all have been told about the ratio has to be something like that: 1/2 at least.

The goal of this Money Management System is to reduce the Risk to zero.

How come...?

This is the HEDGE they have been taught us:
The Order 2 is covring the loss from the first Long trade when price keeps going down.

Notice: Afterall, don't forget that this strategy is very powerfull and great tool, but not easy to handle.
The way to HEDGE for a winning Hedge Strategy


The good thing on this MMS is that you have to forgot thinking if the market is going up or down because from the STEP_2 you will start hedging. (You will always have 2 opened trades: one long position and one short position). The only matter for you from STEP_2 is that the last trade opened must be the winning one because his lotsize is twice the previous one.

The first order (buy or sale)depending on the trend (Price action) is the STEP_1 of the MMS.
Let's say we have SL = 100 pips and your trade is 55 pips up.
Pips DIFF is very important in this MMS (I do regret that in MT4 platform I can't see that information). Pips DIFF is the difference between from current market price and the price you opened the first trade. 
From STEP_2, Pips DIFF is abs (Order x - Order x-1). 

At This point, you decide to start STEP_2 of the MMS:

So you open the opposite trade and the lotzise is twice. (You keep opened the first trade)
You have in orange everythings new or to modify.

Money Management System is launched:
My SL from Order2 is 55 pips below my opened price  (Remember Pips DIFF calculated) => 102.5
Now I have a TP for Order1 which the SL from my Order2 => 102.5
Now My SL from Order1 is breakeven (opened price) => 101.4

Now there is only 2 stories that can happen. The price will go down or up.
All you have to do is to be patient and feel very confident because if the market is going down you will be able to do STEP_3. If you are unlucky and the market is still going up (you have triggered STEP2 too early) both of your trades will be closed with 0 profit but 0 loose

1 ) Let's see what happen if the price is finally going up:
You have in orange everythings new.

Live rate is now 102.50 so :
Order1 is closed by TP => + 151.8 €
Order2 is closed by SL => - 151.8 €
      Result :                            0.0 €

2 ) Let's see what happen if the price is finally going down:
You have in orange everythings new.

Live rate is now 101.25 so :
Order1 closed by SL => 0
Order2 is still currently opened => 193.2

According to Fundamental or Technical analisys, price will go up, so you can start STEP_3:
 You have in orange everythings new.

Here my Money Management System is restarted
My SL from Order3 is 70 pips below my opened price  (Remember Pips DIFF calculated) => 100.55
Now I have a TP for Order2 which the SL from my Order3 => 100.55
Now My SL from Order2 is breakeven (opened price) => 101.95

If finally price goes down and reach SL from Order 3 and TP from order2, you know you haven't loose any money because this Money Management System is magic.
(Order2 will close by TP => + 386.40€
Order3 will close by SL  => - 386.40€
      Result :                            0.0 €

Otherwise you can keep STEPing my MMS and making huge profits with a crazy Risk/Reward.


All you need it's a little bite of skills and a good timing.
Don't be too greedy
Be patient & rigourous

I hope you find this MMS interesting.
You can also leave your comments or posting example of your trades if you have been successfull with it.
Good trades to all.

Pepperstone | Metatrader 4 Forex Broker

Fed up about Money Mangement? While trading with low deposit.... How to win on Forex?

The equivalent question would be how to win a war? We need a war strategy and an army.

Regarding trading, the most important thing is to protect your capital. In order to make sure you really achive this, I will describe in few steps how to do it. The idea is to rade only with what I call "free money". Free money is profit earned from trading while "capital/investment" is money earned and saved from your hard work (your real job). When you trade with "hard money", you take the risk to loose it. When you trade with "free money", your risk is absolutely zero. The only risk taken by trading with "free money" is to win. If you blow up an account with "free money" you don't get affected emotionnaly as it was "hard money" lost.

So now, you wanna know how it is possible to trade with "free money". You simply need to follow the steps. Forget about the MM you have been taught for years. It isn't suitable for retail traders with low capital (under $2.000 at least). Retail traders try to trade like professionals. If they have such strict rules, that's because they manage millions of dollars. We do not have to worry much as them. they limit loss to 2% per day.

Step 1:

Would you play chess with only 1 piece? This is the same on Forex... Trading with only one account is too dangerous. We need to build an army of trading accounts. If you trade with 1 account, then 100% risk if focused into a single account. If you have 7 accounts, then naturally, the global risk to blow up 7 accounts at once is divided by 7.

How to create multiples accounts "free money trading acounts"?

- Let's say with an initial deposit of  €150, the goal will be to double the account (100%).
- When you have achieved this, you create a second account and you send the profit there.
- You have to repete this goal until you reach your goal. (Number of "free money" accounts you wish to get). My initial goal was to create 10 accounts but ForexFactory has a limitation of the trade explorer we can upload to 8. So I have decided to create up to 7 accounts of  €150. You will understand what will be the role of the last account on step 2.

At the end of Step 1, we have an army:

Step 2:

Now I have 7 "free money" accounts. The account number 8 is the Chief Army (Bank). This account will be collecting profit from the 7 soldiers accounts time by time. Before trading agressively with the soldiers... it is important to bank the profit. Imagine the 7 soldiers accounts blow up at once... So the bank needs to hold at least €1.050 (€150*7)

Step 3:

Once Step 2 is done, we are allowed if we want to to compound profit on the account in order to maximize our trading. If an account blows up, that's part of the game and it can always happen anytime. So if 1 soldier dies, it doesn't mean our army can't fight anymore. So we still feel strong, and we avoid bad feelings because of losing 1 account including initial deposit.

Step 4: (optional)

As soon as the first account blows up, create a new account... So we have from now 11 soldiers. Collect money from 9 accounts and divide by 11 to re-fill all accounts with equivalent capital.
As exemple: let's say we are 30% up on 9 accounts and the first account just blew up.
( $130*9 ) / 11 = $106
We have now an Fx army of 11 soldiers that worths $106 each.
=> Get back on Step 3 and do your best to keep doubling accounts

In theory, once Step 1 is reached, it seems impossible to lose any money on any financial markets. Obviously, your accounts are trading different pairs, direction, strategies (scalping, swing,...). All accounts aren't necessary trading 100% of time...in order to avoid full damage on our army in case whole market would become crazy (crisis,...)

* * *

I may restart this sappraoch one day. I was doing good, until I blew up everything : )


Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.


  1. if you buy euro/jpy and pips diff is negative (-55pips), what to do with second step?

  2. Hi,
    Pips_Diff can't be calculated before at least step_2.
    If you the first order is negative, you may not be able to start this strategy. Better to close it and restart.

  3. It was quite an interesting read, you have got my attention.

    So if you get the direction at first and are able to identify trend reversals you can make very good money. If you are wrong at some point you should be able to get out with no major loss (slippage and spread should also be taken into account of course).
    If you don't get it right at first better try again.

    What are the major concerns/drawbacks of this system on your experience?


  4. Thank you for your post.
    Indeed, in theory, this system is powerfull...But in practise, it become harder because we will have to restart evrytime we don't do the next step at the right time. And timing is the word. But we never know what market is doing. So you need patience... and it's a bit frustrating also because we were winning high profits.... and it comes back to 0.

    Good luck