Our trading is based on strict and precise money management rules. Even though they might slightly differ from case to case, these rules are set in place a priori on all managed accounts, regardless of their size and the client's risk exposure preferences. We take risk management very seriously and work hard to compensate our small trading sizes by spotting better entries and exits and taking advantage of as many opportunities as possible.

In a nutshell, our discipline in this respect consists of always respecting the following principles (our live trading journal also stands as an accurate illustration of how we understand to protect our investments):

  Max. acceptable drawdown: 20% of account size;
  Max. simultaneous trades: 2 (with several entries in the same direction);
  Simultaneous entries: 1-10 (10% of max. trade size per entry);
  Max. Cumulated leverage: 6:1 (our cumulated positions are never bigger than 6 times the value of the managed account);
  Trading Units: max. 600% of account size per trade, leverage included (see example);
  Required margin - minimum;

Example: Let us illustrate the above rules by a concrete example, based on a 50.000 USD managed account:

  Max. acceptable drawdown: 20% of 50.000 = 10.000 USD;
  Max. simultaneous trades: 2 (with several similar entries for each trade);
  Simultaneous entries: 1-10 (min. 30.000 USD =0.3 Standard Lots per entry);
  Trading Units: max. 300.000 USD = 3 Standard Lots per trade;

Required margin - minimum.

The rules presented above ensure that:

  at any given moment, our accounts are protected by a stop loss placed far enough from the market to allow our trades to develop, while reducing the overall risk of a large drawdown. We use large stops for all our positions in order to avoid premature exits before our targeted profits can materialize.

  we never open more than 2 trades at the same time, and that happens rarely and never with fully leveraged positions. We usually tend to have 1 open trade, consisting in several entries at different levels. Also, the maximum unit size per trade is rarely reached, as our traders prefer to have enough space to manoeuvre small entries at all times (in order to take advantage of minor market movements).

  under no circumstance will the cumulated size of a given trade exceed the maximum unit size set for a particular account (in direct relationship with the account balance). This limit can only be exceeded if a certain position is being hedged (in this case the overall exposure will decrease with the amount of units used for hedging the initial position).

  technically, we prefer using the maximum leverage allowed by the trading platform/broker, in order to minimize margin requirements (positive interest may apply for all unused funds). At the same time, it is very important to understand that our use of high leverage is only intented to keep our options open and allow for possible protective measures (like hedging). We do not use high leverage in order to boost our positions beyond what we consider to be an excessive exposure. We learned from past experience that it is not exclusively the leverage that induces large drawdowns and losses, but rather the use of trading units too large compared to the account's available margin.

For example: we may trade a 50.000 USD account with a very high 400:1 leverage, however even if our remaining margin allows for significantly bigger positions we will still use small lots (30.000 per entry). Alternatively, we could use a smaller 10:1 leverage and instead trade large lots (on a margin deposit proportionally higher). It is obvious that the risk exposure is significantly higher in this latter case, even if the leverage being used is 40 times smaller than in our first scenario (and should theoretically be safer).

Money Management / Understanding Leverage