Money Management

Money management controls position sizing - how much to trade on each signal. Proper money management is crucial for long-term profitability.

Why Money Management Matters

Even a profitable strategy can fail without proper position sizing. Money management:

  • Controls risk exposure per trade
  • Prevents account blowouts
  • Optimizes capital growth
  • Manages drawdowns effectively

Money Management Strategies

Fixed Lot Size

Trades a constant lot size regardless of account balance. Simple but doesn't scale with account growth.

  • Lot Size: Fixed amount (e.g., 0.01, 0.1, 1.0)

Best for: Beginners, small accounts, conservative trading

Fixed Risk

Risks a fixed percentage of account balance on each trade. Position size adjusts automatically as account grows or shrinks.

  • Risk Percentage: Percent of balance to risk (e.g., 1%, 2%)

Best for: Long-term growth, account preservation

Recommended: Most professional traders use 1-2% risk per trade.

Linear Lot Size

Increases lot size proportionally to account balance. Allows for steady scaling.

  • Base Lot Size: Starting lot size
  • Base Balance: Reference balance
  • Lot Increment: How much to increase lot size
  • Balance Increment: Balance increase to trigger lot size increase

Example: Start with 0.01 lots at $1000, increase by 0.01 for every $1000 gained

Manual Sequence

Follows a predefined sequence of lot sizes. Useful for custom progression strategies.

  • Lot Sequence: Comma-separated list (e.g., 0.01, 0.02, 0.03, 0.05)
  • Repeat Last Value: Keep using last value or stop trading

Best for: Advanced users with specific requirements

Martingale

Increases position size after losses to recover. High risk strategy!

  • Initial Lot Size: Starting lot size
  • Multiplier: How much to increase after loss (e.g., 2x)
  • Max Level: Maximum number of multiplications
  • Reset on Win: Return to initial lot size after profit
Warning: Martingale can quickly deplete your account during losing streaks. Use with extreme caution and strict loss limits!

Choosing the Right Strategy

Conservative Trading

  • Fixed Lot Size (small lots)
  • Fixed Risk (1% or less)

Moderate Growth

  • Fixed Risk (1-2%)
  • Linear Lot Size

Aggressive Trading

  • Fixed Risk (2-3%)
  • Martingale (with strict limits)

Lot Size and Leverage

Understand the relationship between lot size, leverage, and account size:

  • 1.0 Lot (Standard): 100,000 units of base currency
  • 0.1 Lot (Mini): 10,000 units
  • 0.01 Lot (Micro): 1,000 units

Higher leverage allows larger positions but increases risk. Always account for margin requirements.

Best Practices

  • Never risk more than 1-2% per trade (for most traders)
  • Scale position size with account growth (Fixed Risk or Linear)
  • Account for correlation - multiple correlated positions = higher risk
  • Test on demo account before using aggressive strategies
  • Avoid Martingale unless you fully understand the risks
  • Always have a maximum drawdown limit

Calculation Example

Fixed Risk (2% risk, $10,000 account, 50 pip stop loss): 

Risk Amount = $10,000 × 2% = $200
Pip Value = $200 / 50 pips = $4 per pip
Lot Size = 0.4 lots (for most pairs at $10/pip per lot)

The EA will automatically calculate and adjust lot sizes based on your chosen strategy.