Recently, we had a client email us with a list of questions for Jon Morgan, and how the MAM Account is traded.
We forwarded the email to Jon and he replied to him. Then we thought hey – maybe many of you guys might have similar questions, but were just afraid to ask. Well, we decided to share this email with you and hopefully it will give you everything you need to decide if our Managed Account service is right for you!
Some of the questions that the client had were in regards to:
1. Risk Management Strategy
2. Expected Draw-Down
3. Use / Lack of use for Stop Loss
4. Equity Guard
Here is the email:
First, thank you for the contacting me, for your compliments and your questions. Please don’t ever feel apprehensive about reaching out to me at Forex Lens. I feel it is incumbent on me to be receptive to your concerns and answer any questions that I can – it’s your money at risk! Let me answer your questions:
Trade style and approach: I don’t know if you are a member of the trading room at Forex Lens, but I am there everyday Monday – Friday (minus some time off or random emergency) from 0730 CST to 815ish CST. I talk about the charts, trades and the trades that I take I put on the signals page. You can ask me questions in there as well.
Lot Size: If there is one thing about my style of trading that is very fluid and dynamic, it’s the lot size. I basically have two types of categories that lot sizes are going to fall under. If a market is going to begin a new trend/pullback/correction, the initial positioning in that setup yields a great majority of the big profits – it is also associated with the most amount of drawdown and risk. In trend, trades are going to have smaller lot sizes.
Draw-Down: One of the great destroyers of trading accounts is the fear of their current balance and the ‘number’ on paper. If you enter a trade and you are worried about the money or the loss or the drawdown, you have already lost the trade. There can be absolutely no apprehension about a trade or worry about the loss – you have to believe the money you are risking on a trade is gone already. It’s the primary reasons many traders lose: they get afraid of their balance and leave trades early. Now, that is easier said than done. I still get anxious at times, but for the most part, I’ve developed a thick skin – I think I just got used to the feeling associated with money being lost or the possibility of it being lost that I got used to it! April was a tricky, tricky month. It usually is a very tricky month, but still came out ahead. It’s not lost on me the ‘panic’ some account holders may feel and it’s my job to let everyone know, ‘hey – yea – it’s scary, but hang in there’. Again, most people come to a service like a MAM account because they have realized how really impossible trading is, so they ask someone like me to do it for them! 🙂
Stop-Loss: These vary depending on the current market dynamics, trend, season, month and cycle. It would take to long to respond write, but while the use (or lack of) of stops seems random, it’s not. What seems very random and dynamic with the stops is actually one of the more static parts of my trading. For the most part, though, I don’t like to use stops: they are free tickets for brokers and dealing desks. I much prefer mental stops. But I do monitor the account all day and night (my wife always gets annoyed with me!). I even set alerts overnight when I sleep or when I am at the gym. I always have access to the account. If I ever could not have access, the account would not be exposed (or it would be, but with a very small exposure).
Equity Guard: This is also something that I do not care to look at or keep track of. One of the things I talk about frequently with new traders and the Forex Lens trading room subscribers is that looking at your balance is just a way to increase your losses. If you have the discipline to trade small and manage your risk/lot size, you don’t need to look at your trade balance. You might not know this, but it’s actually a strategy that brokers and makers do: always have the balance showing on the screen – it keeps you on edge. It keeps you afraid. It keeps you excited. It makes you hopeful, greedy, afraid and scared. Your balance is your ammunition, you should check it just enough to make sure that you won’t run out of ammo – don’t worry about making it bigger. I focus on making winning trades – that is the goal and the only equity guard that is needed.
I hope this answers most of your questions (I don’t know if I hit them all, let me know if I didn’t!).
And again, don’t ever hesitate to contact me/us – you’ve put your money at risk with a total stranger with the hopes that the money you put in won’t be less when you take it out!
Have a blessed day,