Zhuode Foreign Exchange tells you about the application of risk management in trading techniques in the foreign exchange market/Shenzhen Zhuode Foreign Exchange Investment Agency

Zhuodeforeign exchangeTell you about the application of risk management in trading techniques in the foreign exchange market/Zhuode Foreign Exchange Investment Agency

QQ:2267759265Deng Qian Telephone 13918459303

Application of Risk Management in Trading Techniques in the Foreign Exchange Market

1、 Theoretical risk management

In order to facilitate better trading, we have also browsed some articles and books related to risk management. However, in my opinion, the best written book should be John Murphy's translation by Ding Shengyuan in the United States《futuresMarket Technology Analysis. In Chapter 16, "Risk Management and Trading Strategies," John Murphy provides a detailed explanation of some universal principles of risk management, as well as methods worth learning and learning from, such as how technical analysis can be organically integrated with risk management. However, theory is only a theory, seemingly comprehensive, and when faced with practical situations, the problem becomes more complex.

1.Fund allocation: In theory, the investment amount should generally be limited to the total amount of funds50％(The more conservative are30％). But if we compensate for the transaction costs50%What should we do next? It's using the remaining50%Bring back the losses or use the remaining funds50％(That is, the original total funds25％)To earn back twice its amount? If we use the existing funds again50%Engage in transactions and earn double the transaction amount. In order to obtain greater returns from the operation of funds, we should certainly double the transaction. But in this way, there is a possibility of losing the newly profitable portion, even to the point where even the capital needs to be invested. What should we do?

2.Portfolio: A popular practice nowadays is not to put eggs in the same basket. Indeed, the emergence of the internet and electronic trading have enabled futures traders to trade multiple commodity contracts simultaneously. But the problem is, although the eggs are placed in multiple baskets, it is still us who carry the baskets. How many hands do we have? Can we hold onto several baskets at the same time? Currently, many companies organize retail funds in different ways to form funds and enhance their ability to resist risks; However, the investment portfolio believes that we should diversify our limited funds and break them down into smaller ones. Experienced investors in the futures market are well aware that the stronger the ability to resist risks, the greater the space for profit.

3.Stop loss: Stop loss is indeed an effective method to prevent greater financial losses. However, the devilish price trend often disrupts your stop loss plan and leaves you unable to close your position. Even worse, during a wide range of price fluctuations, the stop loss caused us to lose control. What is even more terrifying is that those who set stop losses based on funding and probability rather than trends are actually chronic suicides.

2、 Common fund utilization in actual futures trading

1.Full position trading method: This is the fighter's approach. Once they believe they have captured the market trend, they do not hesitate to fill their positions and buy or sell.

2.Backward position increase trading method: This type of person's approach is to tentatively buy in small quantities based on the proportion of funds when they believe that the futures price is about to rise but feel uncertain. If the price does not rise but falls, and when the price drops to a certain level, they will buy in twice the amount of funds from the first transaction; If things don't go well and prices fall again, they will buy it for the third time with twice the amount of the second transaction. If you are bearish, then do the opposite.

3.Radical position increase trading method: Assuming that the price is about to rise, buy with a small amount of funds first. Once profitable, it is not closing the position, but buying in large quantities with several times the first trading capital; If the price continues to rise, it is possible to invest all the remaining funds. If there is a mistake or closing the trading position, reorganize the situation; Or ignore it and seek new opportunities. If you short, the same applies.

4.Speculation trading method: Fast in and fast out, capturing the extremely small ripple like price difference in daily price fluctuations, and using quantity as the winning trading technique.

5.Deadly resistance trading method: No matter how long you short, whether the trading order you make is profitable or trapped, always hold your trading position until you think it's time or necessary to take action. The theoretical basis for such investors is that when they are trapped, they believe that if there is an increase in price, there will be a decrease, and if there is a decrease, there will be an increase. The price will always come back. When making profits, it is believed that the trend cannot end in a short period of time, and profits should be fully increased.

6.Bidirectional open position trading method(Commonly known as lock in trading method): In the same month, at the same price point(Relatively speaking)Build positions with equal trading volume in both directions simultaneously. If the price rises, there are two ways to do it. One is to close multiple orders and hold short orders until it is confirmed that the price has reached the top. One is to hold profitable trading positions and offset loss positions once multiple orders are profitable. If the price drops, the opposite is true.

7.Probability trading method: If the first transaction fails, close the position and exit with a small loss limit set by oneself; The second transaction failed and the position was closed out with a small loss limit set by oneself. The third or perhaps fourth time should be profitable. Because of probability, I refer to it as the probability trading method.

8.Arbitrage trading method: either the same variety in different markets, or different months of the same variety in the same market, trading based on the price difference between them, the amount of long and short positions, etc., to extract profits.

Here, let's disregard the superiority or inferiority of these trading techniques, as there is a question of timing involved. If we choose a good opportunity to enter and exit the market, we can make no mistake in choosing any trading method; But if the choices made are always wrong, I'm afraid any trading method will be disheartening. The above mentioned trading methods, either due to differences in the market or differences in the experience and personality of investors, can basically be divided into two or three different trading methods.

3、 Animal predation art and trading skills

In nature, there are many hunting arts of animals that are worth pondering. Below are some exciting hunting scenes of several types of animals:

On a plain in Africa, there lies a quiet river winding along. A deer came to the small river and cautiously looked around until it was confirmed that there was no danger by the quiet riverbank. It then lowered its head to drink water, but occasionally looked around anxiously. Perhaps the peaceful river surface is a symbol of safety, and perhaps the cool water makes it particularly refreshing. Only for a moment - just for a moment, it is intoxicated with the joy of drinking water. However, in that moment, tragedy occurred - there was no sign of tragedy happening on the peaceful river surface. Suddenly, a giant crocodile with its big mouth open jumped out and bit the head of the deer that was bowing its head to drink, dragging it into the water

A hungry wolf that had not caught any food for seven consecutive days stared greedily at a male antelope ahead. The yellow antelope is much larger than the wolf, and it has sharp horns on its head that are enough to kill it, making the wolf intimidated. If the wolf is not very hungry, in most cases it will give up this dangerous hunting; But today it cannot give up. The cunning wolf took advantage of the moment when the yellow antelope was not paying attention and quickly rushed up from behind, extending its sharp claws to fiercely scratch the back thigh of the yellow antelope. When the antelope reacted and tried to use its sharp horns to pierce the wolf's belly, the wolf quickly dodged. The avoided wolf did not leave, but kept a certain distance from the antelope and followed it. Several bloodstains appeared on the area where the yellow antelope was caught, and gradually blood began to gush out. In the hot summer, the bloody smell quickly attracted the bites of flies and other mosquitoes; The wound of the yellow antelope began to suppurate, which also caused diseases on its body... When the wolf saw the yellow antelope struggling to move its three legs, it knew that the prey could no longer harm itself, so it pounced on it and bit the yellow antelope's neck

During the trading process, do we remain calm and patient like crocodiles, focusing on opportunities with all our might, or are we like cunning wolves, maintaining distance in stages and orderly, avoiding risks, and waiting for opportunities to come?

Zhuode Foreign Exchange tells you about the application of risk management in trading techniques in the foreign exchange market/Shenzhen Zhuode Foreign Exchange Investment Agency

QQ:2267759265Deng Qian Telephone 13918459303