Forex Capital Weightlifting Championship

Hello. I have being working on a "new" (probably already out there but new to me) Money Management System and thought I'd share. The system was brought about by attempting the thread "Rags to Riches in 10 to 20 Trades" http://www.forexfactory.com/showthread.php?t=444377 . I was attempting this high risk system and though I never completed it, I quite often managed more than a few levels up. It got me thinking about how I could preserve my capital but also retain the current trading level achieved. After experimenting with the system and finally working out the nuts and bolts I was able to trade it consistently and have made a few happy discoveries. I'm not sure about other peoples trading successes but my winning trades tend to come in waves, as do the losses. Often I believe it has to do with market uncertainty versus confidence and trends being developed. I look at my trading history (both in pips and profit) and I see patterns and sometimes it is like looking at the PA charts. I see highs, lows, trends and moments of uncertainty. My losses come about, I have noticed, from being in a trend and only after the 3rd or 4th loss have I come to realisation that market liquidity has dried up or there is uncertainty at the current level or perhaps there is a fundamental reason that awaits judgement. On the other side of the coin, I have entered a BO trade to be caught in a lovely full move, taken profit, re-entered and by the 3rd or 4th green light in my MT4 history am feeling quite proud of myself. Though I am still in testing of this MM system (needs at least another 6 months) I believe that the way it works could take the best advantage of the scenario I have just described, making the best out of the winning runs and yet keeping risk to a minimum at times of uncertainty. My system is at the higher end of R:R systems but with a 5% Risk for a 50%-80% reward in an not unachievable scenario it could be used as an everyday MM system. A very crude way of explaining my system would be to say that I risk 10% of my capital and try to double it 3 times using 2:1 trades. So: $50 (10% start), $100, $200, $400 at which point I would start again. That brief explanation was difficult to type however as I believe my system has more elegance, finesse and less risk.

Things to know:
Firstly this is thread is directed more toward experienced traders who already have their own trading strategies in place but it could also potentially turn a losing strategy to winning strategy.
The system relies on 2:1 R:R trades but it could also be incorporated into other R:R trading.
When I say "Net trades" it means how many more wins vs losses, not how many trades won in a row.
I will refer to "levels" during my explanation. What I mean by this are the 2:1 levels. The levels outlined in the RagstoRiches thread are as such:

$200
$400
$800
$1600
$3200
$6400
$12800
etc...


Ok.. To start with I use 2 trading accounts, however a trading account and bank account can be used (I just like using another account because funds can be transferred quickly within the same broker). I use one account for my Capital that I call the "Principle" account and I do zero trading from this account but use just as a bank account, and the other account I use for all my trading that I simply call the "Trading" account.

The Principle account objectives are to reach the R2R levels and beyond outlined above ($200, $400, $800 etc.). I do this by using 10% of the current level I am at. So if I have $1800 in my Principle account the current level I am at is $1600 so 10% is $160 and that is my risk (however I only risk 50% of the $160 but I will get to that later). Now as I am attempting to achieve my goal (again, will explain in a moment) and my balance is dropping through failed attempts it can drop to the next level down of $800 before I drop my risk of 10% to this level ($80). So to sum up the Principle account, I am aiming for the outlined levels and I am risking 10% of a level until I hit either the next level up or the next level down where I will change the risk accordingly.

The Trading account objective is to reach +3 2:1 net trades. So using the example above I have $1800 in my Capital account so my deposit level is $160. I transfer $160 from the Principle account to the Trading account. (Note: This will be the only time that a full 10% transfer will happen, from here on it will only be in 5% increments). Now I have $160 in my Trading account I will try for my +3 net trades. Risking 50% of the $160 ($80) I will attempt to reach 100% reward ($160) for the first 2:1 trade. Rinse and repeat 2 more times until +3 trades are achieved ($320, $640, $1280).
The important rule here to remember is that the moment that negative territory is reached and -1 net trades is hit (so $160 becomes $80 from the previous example) the Trading account needs to be topped back up from the Principle account. So $80 is withdrawn from the Principle account and transferred into the Trading account. The reason for this is because +3 net trades can be difficult at times so they need to be taken advantage of from the outset rather than starting from the backfoot and having to accomplish +4 net trades to achieve the goal.
To take profit from the Trading account, anytime a trade is closed above the "-1 level" of the Principle account the profits are transferred from the Trading to the Principle account minus the deposit so the process can start over again. So again using the previous example, say on the 3rd trade I used a trailing stop and it got stopped out before the full TP could be taken. My Trading account is now on $950. Instead of risking my gains the amount is now above the -1 level of my current trading level. I started at the $1600 trading level, so -1 level= $800. My Trading account is $950 which is above that level ($800) so I transfer the full amount minus the deposit of $160 (so I can start the process again) which is $790. Though the full objective wasn't completed the risk of losing +49% of the current level of the Principle account isn't worth it and is great reward.

It's a powerful system when you consider that it's possible to have 10+ losses while waiting for +3 net winning trades and still be able to end up infront. There is more to this system that meets the eye as I found out quite accidentally.

That's about it. There are a few finer details like smaller deposits, leverage etc. just ask if interested. Hope you enjoy.

Matt.

Source.