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Canna_King Cheers =D really appreciate it!
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bone Thanks for your feedback. I agree that money management is too often merely an afterthought, and that it can't really be distilled into simply "never risk more than x% of capital per trade".
For the app, as a designer I have some different options:
- No context: effectively cuts out those who don't know about money management as they won't understand what it is or why it should be used.
- A little context: useful for those who don't know about money management, while not too distracting for those who do.
- A lot of context: distracting for all users and is beyond the scope of the app. (which is to simply be a calculator)
I've considered adding a
link to some resource with in-depth explanations of money management and strategies. That would give better context while not being too distracting.
On a side note, the 2% rule is often understood too simplistically and consequently gets a lot of undeserved flak. It is not to be understood simply as e.g. "take a single vanilla position in an asset and exit if loss equals 2% of capital. It can also go something like the below hypothetical and highly simplified example:
Capital: $100 000
I identify a setup and go long $10 000 in SPX with x20 leverage. I set my stop loss at 1% of SPX. Thus, if SPX drops 1%, I loose $2000. (=2% of my capital) The stop loss is moving.
Day 1: Let's say SPX rose by 1%. I'm now up $2000 on the trade. I add another identical position.
Day 2: Let's say SPX rose another 1%. I'm now up $4000 on the first position and $2000 on the second one. I add another identical position.
Day 3: Let's say SPX rose another 1%. I'm now up $6000 on the first position, $4000 on the second one and $2000 on the third.
Day 4: Let's say SPX dropped 1%, triggering the stop loss for all three positions. I lost $2000 each on them this day = $6000, but I'm still making a $6000 profit.
