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The Lower Hanging Fruit – Money Management Strategy

After struggling for two years in trading, I hadn’t managed to find a solid trading concept that made sense to me or helped me. It wasn’t because of a lack of effort or research on my part because I did everything in my power, whether it was taking classes to learn everything about trading that I could, but even with all that effort, I was still struggling for consistency.

That is when I became obsessed with finding the right signal strategy for trading, and concentrated all my efforts into finding the truth. Everything changed when I found a trader, who opened my eyes and mind to the world of trading and gave me a new lease of life. There are a lot of people who find trading complex and boring, but if you take the time to learn it, you will find that it is quite interesting.

The trader that I had come across was trading a simple system that was quite common. He showed me two years of his equity curve, which identified when he was up and down on his balance, and the point in time when he made a decision that changed his life. The result of that decision was an exponential solid upward curve, which fascinated me.

I couldn’t believe that the decision he made was so simple, yet had made such a massive impact. It was embarrassing to learn that something so simple could be done, and I was frustrated with myself for not thinking along the same lines. The decision he made was a self-agreement contract that he did with himself, which had the following details:

  1. Bank profit fast at the end of a very fast momentum burst.
  2. Daily target is set to 15 pips (he was a forex trader).
  3. Get flat at daily target or after 3 entries, or at a total loss of 15 pips
  4. 15 pips always equal to money value of 1.5% from the account.

The result of his decision was astonishing, because the trader managed to get over 85% winning days, and the best part was that he was heading to the beach by early noon. The great thing was that in only 3 years he managed to grow his account from 500 Euros to 6 digits, and that was after routine withdrawals were taken out!

Those aren’t just good numbers, they are stunning numbers! I couldn’t believe that someone could achieve growth that fast, and it was only by staying humble. This was a game-changing revelation for me, and I decided that I was going to do the same thing. Therefore, I decided to implement his strategy into my now trading, and I am going to share those results with you today.

The first thing I am going to reveal is that my own analysis went on a completely different path from the one that the trader took. That is because I kept on changing my analysis and repeatedly refined my entries, but I kept things simple by only taking the lower hanging fruits. Keeping things simple, meant that the rewards presented at the end of the day to me were more than satisfactory.

One of the biggest mistakes that traders tend to make is that they set their eyes too high up on the tree, and don’t realize that by doing that, they are setting themselves up for failure.

Consistency by Being Humble

When you are starting your forex trading career, you will come across a lot of material that will teach you how to make money fast and about how easy this career path is going to be. However, the one thing that you will not find in any sophisticated article or in the many books on trading, is how you should target the lower hanging fruits on the tree. I learned that lesson from the trader, who taught me that by keeping things simple, you don’t complicate your own trading strategy or try to aim for too high a prize.

The most important thing that you must remember as a forex trader is that you must try to achieve consistency in the results. Now, this doesn’t mean consistently failing, but we are talking about achieving winning consistency here. I am assuming that everyone that is involved in forex trading has a good grasp of basic math, and if you do the arithmetic, you will realize how powerful a strategy targeting the lower hanging fruits really is for trading.

To make my point, and prove to you, I will show you the results. We will be taking the same decisions that the trader had done, and in the end come out with two possible outcomes. The first result would be that we have managed to gain 85% winning days. The second result will be that we have lost. So, this is what we are going to do with our trading:

  1. Bank no more than 15 pips per a single trading day
  2. Weight the position for 15 pips equals to 1.5% from the account
  3. Risk only 15 pips per day.

I will be breaking down difficult terms as well, so that anyone that isn’t familiar with forex trading can also properly understand what we are trying to achieve over here. For instance, when we talk about 15 pips for forex major vehicle, it is approximately 18% to 10% from the daily range.

The complete zigzag path, which is based on the M15 timeframe, will show that it is only approximately 1% to 5% from the daily pips movement available.

Therefore, if you are confused about what low hanging fruit is in forex trading, it is the achievement of 15 daily pips. The graph below is for reference, where we are implementing our strategy, and remember that the end result we are going for is low hanging fruit, which is 15 daily pips.

growth

This graph shows the results of the past 12 months, where using the strategy that we discussed above, we have managed to make over 35,000 Euros, which is an astounding 3500% growth! That is an incredibly amount of growth rate, and the graph below verifies and acknowledges that growth.

After you have applied the strategies the growth chart that you are looking at should resemble this. Looking at the percentages, you will notice that the figures of 3500% growth are accurate.

The realized equity chart would resemble this:

This graph shows that when you have a lengthy sequence of losing strike, where you are only risking 1.5% value every day in trading.

Have you noticed how the graph chart never manages to reach the complete 100%. Let’s say that the scenario has been exaggerated, but there is a constant risk, which means that you won’t manage to blow the account, and hence there is a potential to recover from this loss.

If you apply the theory, then by doing simple math and maintaining disciplined behaviour in trading, you will find that long sequences of losing strikes can be recovered as well. That is because when you achieve exponential growth on consecutive winning days, you can overcome those losses.

Sweat Reward for The Instant Generation

One of the main reasons why the current generation of forex traders fail to get winning results is because they want instant results and don’t want to sweat for rewards. That was the thinking that I had as well when I dived into forex trading, not realizing that it is not the right strategy. The biggest revelation to me was that by keeping things simple and remaining humble about my expectations from the market, I managed to make amazing gains from the low hanging fruits.

The sophisticated trading markets of today tend to confuse traders, because they offer extremely high liquidity, and all the brokers will be offering you with leverage. However, what they don’t tell you is that the only way you will manage to find consistency in the market is if you manage to remain humble. There is a simple strategy at work here, and the best part is that everyone can take advantage of it.

All you need to do is take your share of the pie fast, understand when you must end your daily, and leave for living your life. Over the course of my forex trading career, I must have met with thousands of different traders, but almost all of them are looking for instant success, which means that they don’t keep things simple, as they are too focused on taking big risks, to acquire bigger rewards.

That is why there is no sweat reward for the instant generation, because they aren’t willing to grind it out, and take their losses on the chin. Too many traders give up at the first sign of trouble. I will tell you from my own personal experience in forex trading that keeping things simple isn’t easy by any stretch of the imagination because the market is so complex. However, once you manage to train yourself, and start following your own checklist you will start noticing that things are falling into place.

The secret to achieving success in forex trading is by keeping things as simple as you can. It may seem like rocket science to you, but trust me. The only things you need to know is when you bank, when to go home, and know how much a losing day is going to cost you. However, don’t be disheartened by losses, because in forex trading, there is always the potential for a massive recovery. This is the simple concept behind achieving success in forex trading, and implementing it showed me great results.

Implementing the Lower Hanging Fruit Money Management on Your Own Strategy

There are so many traders that are bad at money management that it is almost comical, if not sad. That is a problem caused by perception and complicating things that should be kept simple. I am going to change all that by showing you the way, in how you can implement the lower hanging fruit money management on your own strategy. So, here is how it goes:

→ Main Objective

Over here we will be discussing the main objective of the lower hanging fruit money management strategy, and the end result you should expect.

→ Define volatility and range profile

The market is always going to be fluctuating, but always keep your eyes on the prize, and don’t be scared by the volatility. You must set a range profile, which will mean that you must know how much a single day loss is going to cost you.

→ Focus on the target

We already talked about keeping your eyes on the prize, and I am going to reaffirm that here. When you are focused on the gains you want to make, you will start seeing results that will take you towards the path of success.

→ Understanding and overcoming the risk aspect

One of the most important things you must look at in this money management strategy is understand the risk element. Once you have knowledge of the risk you are taking, you will then manage to come up with the right strategy that will help you overcome that risk aspect.

Money Management Is the Golden Grail

Forex trading isn’t simple, which is something that every trader will tell you. It isn’t easy as well, because if it was then everyone would be doing it. The rewards are big, but you will only manage to take advantage of them, if you implement the right strategy.

One thing that a lot of novice traders don’t know that the road to success in forex trading is money management. That is the golden grail, because if you don’t know how to manage your losses, you will struggle to win big in forex trading. To ensure that you win, you must keep the following in mind when implementing the strategy:

→ Collect new statistics for your performance

Always measure your performance by collecting statistics and checking up on them regularly.

→ Key benefits (pros)

Identify the key benefits of the strategy and keep tabs on them.

→ The challenges (cons)

It is important you know about the challenges, so that you can overcome them later.

→ Growth Potential

Understand the growth potential, because if you don’t manage your expectations, you will not manage to get the right results in forex trading.

Image Credit: Maja Petric on Unsplash

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