Sunday, June 29, 2008

Forex Analyzing Losses

I was searching for a books on money management some days ago on Google and I found this e-book called "Money Management Report" written by Van Tharp. I read through some of the pages but unable to read them all because there quite a lot for me to read them all.

However I managed to find a piece of information from the book which I think is very important. It is outlined in a table how much percentage of losses you should afford to lose in a trade in order to be able recover them quickly.

losses management

As you can see the able Excel table which I have reconstructed based on the Van Tharp book. According to the table you should be losing more than 25% of your account in a single trade otherwise it takes so much pain to recover them back. As you can see on the table if losing 40 percent or more you will have to suffer more. Losing at 90% of the account is almost impossible to recover back as it takes around 900 percent gain in order to breakeven again. I have little idea how he calculates the percentage but this is already well presented information as a good guides.

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