Difference in Trading of Large Funds and Limited Funds
I am sure you agree that funds are one of the important factors in forex trading. Even in trading known as 3M: Mind, Method, Money, as “three important pillars” in trading, including forex trading.
This time I will explicitly compare the funds “tight” or limited with large funds. It should be stressed here that when I speak of funds I will not talk about the nominal amount of money I have. I will not talk about “the power of funds” here. Believe me I also understand that small is not necessarily weak, big or not necessarily strong. All depends on fund management. That not necessarily small funds will fail and large funds will be successful, I also understand 110%.
What I will discuss this time is more about “flexibility” in carrying out the strategy. Recognized or not, the amount of funds will also determine the strategy that can be applied in my forex trading activities.
I always like to use the “military” analogy. Imagine you are a soldier sent to the front line, but you are only equipped with an M1 Garand rifle and eight bullets. Of course you have to save your bullets and really choose valuable targets. You can’t freely choose a target, because each bullet is very valuable.
To test it, I can test a forex trading system with real money, which is indeed limited. Intentionally using a real account because it is liked or not, “sensation” on a real account is different from a demo account. By using a real account, my money is “at stake” so that decision making should go through the right process.
Finally, even though I managed to get a profit, I would feel the true inability to implement a trading strategy. Yes, compared to accounts that have more loose funds. The profit earned is not optimal because not every opportunity can be utilized properly. Never even did transactions for days. Not because there is no opportunity, but because technical stop loss is not able to be anticipated with the management of funds that have been arranged in the trading plan.
the account has a lack of funds so based on the position sizing rule I am not allowed to open a position. That’s because the risk is beyond risk tolerance.
Another example that has recently happened is, when there are opportunities that are equally good in several currency pairs at once. At the same time even though the funds held are very small. It is not enough to open positions in all of these pairs at once if referring to the trading plan. the funds are “tight”. Finally I was “forced” to choose one pair that I considered to have the greatest potential to generate profits.
But what happened? My choice turned out to be “wrong” because the process was actually correct, so even if the loss was not a problem, if I open a position in another currency pair, it should get a profit.
That’s when it was re-realized that if the funds owned were at least double that. Yes, then at least I have been able to open two positions in two different pairs without worrying about overtrade because everything has been calculated in the trading plan.
It’s About Freedom of Strategy
Don’t get me wrong. Let me repeat my statement that this time I’m not talking about “the power of funds”. Again, it’s about “strategic freedom”.
I agree that the amount of funds owned is not a determinant of one’s success in forex trading. The determinant is his ability to implement the strategy that I conveyed at the beginning of this paper. There is no denying that.
But based on experience, related to the strategy, if I have greater capital. Yes, at least double, I will be able to open a position in another currency pair that also raises opportunities.
I will also be able to take more opportunities without getting super-efficient position sizing.
I will not worry about losing too much. That is because the number of lots that I will take of course will also be adjusted to risk tolerance according to my trading plan. Thus, the potential to increase profits will be more open.