Fixed Ratio Money Management - Is This The Best Money Management Strategy?

Fixed Ratio Money Management | Coffee With Markus | Episode 88

Intro: 0:00
What's Happening In The Markets?: 1:50
Fixed Ratio Money Management: 4:55
Deep Dive Q&A: 21:58

Last Friday the Nasdaq had a bit of scary finish, closing below the 50 SMA. This is a moving average a lot of traders follow and close below it can signal more bearish activity.

But with today's nice bounce back, price is currently above the moving average. This gives traders hope that this was just in fact a correction, not the beginning of a bigger sustained down move.

If you didn't see, I recently recorded a video predicting the pullback and then a video going into more detail of why we typically see corrections like we've had:

Stock Market Crash Fall 2020: https://youtu.be/Y76qguwUuzk
Why Did The Market Crash?: https://youtu.be/Yzozj_NWYow

With a correction you're only looking at around a 10% move off the previous highs which is roughly what we've seen here.

Even amidst this pullback there are some stock making new all-time-highs like McDonald's (MCD), Nike (NKE) and FedEx (FDX).

Now I want to move on to our main discussion for today: Money Management

Recently I received a question asking:

Hi Markus, my account size is only $6,000. Any strategy to grow this to $50k in a year?

So today, I'm going to show you a proven, mathematical method for growing an account quickly using money management.

First off, you must have SRC profits. If you don't know what I'm talking about, first check out this video where I explain exactly what they are: https://youtu.be/nFTCcVZD7xg?t=273

One of the strategies I use to generate SRC profits is The PowerX Strategy, my core trading strategy.
Risk Management: On a $10,000 account we only want to risk 2% of the account on any trade or $200.With this strategy we look at what we call a Conservative and Optimized Entry and Exit.
Conservative:
- Risk: $200
- Goal: $400
Optimized:
- Risk: $200
- Goal: $1,000

So let's look at an example where we took 10 trades and of those 10, we had 5 winners and 5 losers:
5 Losers = 5 * $200 = $1,000
5 Winners = 5 *400 = $2,000
Profit After 10 Trades: $1,000
Avg. Trade = $100 AFTER Winning and Losing Trades

So based off of this would you agree it's realistic to make $100 per week?
Assumption: 5 open positions at any given time.

Now let's take a look at the money management I use to grow my account, fixed ratio money management. So when I'm recording this it is 9/14/20 and for the sake of the example, we're going to say we're starting with:

$10,000 on October 1st with a goal of $100/week or $400 in the first month. Assuming you maintain a 50% win rate, we would then increase our risk each month maintaining our win percentage we would then risk an additional $200. After 1 year, you could have grown your $10,000 to over $50,000 using this proven money management system. Now this is more aggressive than I typically suggest, but I wanted to show you a way it was possible to answer the original question I received.
=============================================================================================
✅ First, subscribe to my channel here so you never miss a new video: https://bit.ly/3aLKLDz
📈 Watch My Daily Trading Routine Here (that takes me less than 15 min/day): https://bit.ly/2ICZkgX
📕 Get a FREE Hardback Copy Of My New Book “The Wheel Options Trading Strategy”: https://tinyurl.com/bvxjjz7k
💻 Need a broker? We prefer trading using Tradier! Sign up here: https://bit.ly/3uw3RaG
🌍 Outside of the U.S.? Check out Interactive Brokers' amazing platform: http://rockwelltrading.com/ibkr
☕️ Start your morning just like Markus, with the MorningBrew Newsletter: https://bit.ly/32Xs6Uu
================================================================================
tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with Rockwell Trading Services, LLC whereby tastyworks pays compensation to Rockwell Trading Services, LLC to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Rockwell Trading Services, LLC by tastyworks and/or any of its affiliated companies. Neither tastyworks nor any of its affiliated companies is responsible for the privacy practices of Rockwell Trading Services, LLC or this website. tastyworks does not warrant the accuracy or content of the products or services offered by Rockwell Trading Services, LLC or this website. Rockwell Trading Services, LLC is independent and is not an affiliate of tastyworks.

Видео Fixed Ratio Money Management - Is This The Best Money Management Strategy? канала Markus Heitkoetter