Ten Oil Trading Money Management Methods
Process below describes the process of formulating oil trading money management and practical advices on formulating your own oil trading money management system in Oil Trading - oil account management.
1. Keep the Necessary reserve (over and above the broker margin requirement)
This reserve is needed for unusual situations & it should be not less than 50% of invested equity. It is the first rule of oil trading account management in margin definition for opening oil orders. However, many experts & analysts advice more reserve of about 70%-90% of invested oil trading account capital for safe operation in crude oil trading.
2. Do not to invest more than 2%-6%
This is one of the principle that helps to avoid bankruptcy: never invest more that 2% on one market and do not to invest more than 6% in the total open crude oil trades.
Oil Account Management Rules
This is not the same as above, the above is never invest more than 5% , this is never to lose more than 2% on a single trade. In this case a trader risks only lose small part of his equity with an unprofitable order.
4. Diversify
The use optimal investment of your funds is that you should diversify to some degree. Just In case one trade losses, the trade order can be covered by trading profits of another trade.
Crude Oil Account Management Rules
On a piece of paper or better still in your trading plan. If you open trade orders then this orders should be within your oil money management guidelines.
6. Define your stop loss and take profit levels
When you are trading put your stop oil orders in order to avoid any huge losses or even bankruptcy. Profit taking levels will ensure you get additional profit by taking money out of the crude oil market. Analyze the situation and predict the future movement of crude oil price action and place orders accordingly. You can even use indicators & volatility of the crude oil price to know where to place these orders.
Oil Account Management Rules
Consider only opening crude oil trades when you have the chance to get profit against loss ratio of 3:1. If you cannot do it then don't open the order.
Oil trading money management should seek to bring maximum profit to the traders account, keeping profitable trade orders as long as possible is a good strategy. Therefore, if you make some profitable trade orders you can have goods results.
8. Try to follow the rules of opening & closing the oil orders specified in your plan.
That way you will get consistent trading results required for making profits in the oil market.
9. Do not revenge against the crude oil market
In this case, you will not be interpreting the situation but you'll just be trading based on emotions & you will lose more money.
10. Timely rest
Do not trade when you're exhausted, no matter how tempting the situation might seem, you might not get the profits that you can if you were to trade based on your oil trading schedule.
Considering these - Oil Trading Account Management Rules and Guidelines can make you trade profitably. Try to develop your own oil money management strategy that gives you good profits.