Table of Contents
Introduction
Money management strategies automatically adjust your position sizes based on your trading history (consecutive wins or losses). This helps you:
- Recover losses faster during drawdowns
- Scale up winning positions during hot streaks
- Control risk with mathematical precision
- Optimize capital deployment
Important Note
Money management amplifies both gains and losses. Always start conservative and test thoroughly in demo mode.
How It Works
Basic Concept
The system tracks your consecutive wins/losses from completed trades and adjusts position size using a predefined sequence.
Base Position Size × Multiplier from Sequence = Final Position Size
Example Flow (Mode 0 - Fibonacci)
Sequence: [1, 1, 2, 3, 5, 8, 13, 21]
Mode: 0 # Move forward on loss
| Trade Result | Consecutive Losses | Position in Sequence | Multiplier | Position Size |
|---|---|---|---|---|
| Initial | 0 | 0 | 1x | $100 |
| Loss | 1 | 0 | 1x | $100 |
| Loss | 2 | 1 | 1x | $100 |
| Loss | 3 | 2 | 2x | $200 |
| Loss | 4 | 3 | 3x | $300 |
| Win | 0 | 0 | 1x | $100 |
Configuration Basics
Configuration File Location
# In tradesettings.yaml or your configuration file
MoneyManagementStrategySettings:
Sequence: [] # Your multiplier sequence
Mode: 0 # 0 or 1
Sequence Format
- Array of positive integers:
[1, 2, 3, 4, 5] - Empty array disables:
[] - Must contain only positive values: No zeros or negatives
Mode Options
| Mode | Direction | Use Case | Risk Profile |
|---|---|---|---|
| 0 | Forward on Loss, Backward on Win | Recovery-focused | Conservative |
| 1 | Forward on Win, Backward on Loss | Momentum-focused | Aggressive |
Mode Selection Guide
Mode 0: Recovery Strategy (Recommended for Most)
When to Use:
- Win rate between 40–60%
- Focused on recovering from drawdowns
- Risk-averse trading style
- Mean-reversion strategies
How It Works:
Loss → Increases position size (moves forward in sequence)
Win → Decreases position size (moves backward in sequence)
Example:
Sequence: [1, 1, 2, 3, 5, 8, 13]
Mode: 0
# After 4 consecutive losses:
# Position = Sequence[3] = 3x base size
# After next win, position drops back
Best Sequences:
- Fibonacci:
[1, 1, 2, 3, 5, 8, 13, 21] - Linear:
[1, 2, 3, 4, 5, 6, 7, 8] - Capped Martingale:
[1, 2, 4, 6, 8, 10, 10, 10]
Mode 1: Momentum Strategy
When to Use:
- Win rate above 60%
- Trend-following strategies
- Want to maximize winning streaks
- Strong market conditions
How It Works:
Win → Increases position size (moves forward in sequence)
Loss → Decreases position size (moves backward in sequence)
Example:
Sequence: [1, 2, 4, 8, 16, 32]
Mode: 1
# After 3 consecutive wins:
# Position = Sequence[2] = 4x base size
# Lock in profits by taking partial wins
Best Sequences:
- Anti-Martingale:
[1, 2, 4, 8, 16, 32] - Conservative Growth:
[1, 2, 3, 5, 7, 10] - Capped Growth:
[1, 2, 4, 6, 8, 10, 10]
Trading Style Configurations
1. Day Trading / Scalping
Characteristics:
- High frequency (10–50+ trades/day)
- Quick decisions
- Small profit targets
- Tight stop losses
Recommended Configuration:
MoneyManagementStrategySettings:
# Conservative - Quick recovery without over-leveraging
Sequence: [1, 1, 2, 2, 3, 3, 4, 5]
Mode: 0
# Alternative: Flat sizing for consistency
# Sequence: [1, 1, 1, 1, 1, 1, 1, 1]
# Mode: 0
Why This Works:
- Limits exposure during volatile conditions
- Doubles at each level for stability
- Max 5x multiplier keeps risk manageable
- Fast return to base size after wins
Capital Requirements:
- Minimum: $1,000
- Recommended: $5,000+
- Max position: 5% per trade
2. Swing Trading
Characteristics:
- Medium frequency (2–10 trades/week)
- Holds positions 1–7 days
- Moderate profit targets
- Wider stop losses
Recommended Configuration:
MoneyManagementStrategySettings:
# Classic Fibonacci - Balanced growth
Sequence: [1, 1, 2, 3, 5, 8, 13, 21]
Mode: 0
Why This Works:
- Natural mathematical progression
- Well-tested over decades
- Moderate scaling for swing timeframes
- Good balance of risk/reward
Capital Requirements:
- Minimum: $3,000
- Recommended: $10,000+
- Max position: 3% per trade
Alternative for High Win Rate (>60%):
MoneyManagementStrategySettings:
Sequence: [1, 2, 3, 5, 8, 13, 21]
Mode: 1 # Capitalize on winning streaks
3. Position Trading / Long-Term
Characteristics:
- Low frequency (1–5 trades/month)
- Holds positions weeks to months
- Large profit targets
- Very wide stop losses
Recommended Configuration:
MoneyManagementStrategySettings:
# Conservative Linear - Predictable scaling
Sequence: [1, 2, 3, 4, 5, 6, 7, 8, 9, 10]
Mode: 0
Why This Works:
- Slow, predictable growth
- Easy to plan capital allocation
- Long time between trades allows recovery
- Max 10x over extended period is reasonable
Capital Requirements:
- Minimum: $10,000
- Recommended: $50,000+
- Max position: 2% per trade
4. Grid Trading / Automated Systems
Characteristics:
- Very high frequency
- Multiple simultaneous positions
- Range-bound strategies
- Systematic approach
Recommended Configuration:
MoneyManagementStrategySettings:
# Capped Martingale - Controlled scaling
Sequence: [1, 2, 4, 6, 8, 10, 10, 10, 10, 10]
Mode: 0
Why This Works:
- Aggressive early recovery
- Caps at 10x to prevent blow-up
- Maintains max size for extended drawdowns
- Works well in ranging markets
Capital Requirements:
- Minimum: $5,000
- Recommended: $20,000+
- Max combined positions: 10% of capital
5. High-Frequency Trading (HFT)
Characteristics:
- Extremely high frequency (100+ trades/day)
- Millisecond execution
- Tiny profit per trade
- Very tight stops
Recommended Configuration:
MoneyManagementStrategySettings:
# Flat or Minimal - Focus on consistency
Sequence: [1, 1, 1, 1, 1, 1, 1, 1]
Mode: 0
# Or disable entirely
# Sequence: []
Why This Works:
- Statistical edge matters more than position sizing
- Too many trades to track meaningful streaks
- Consistency is key in HFT
- Risk management via quantity of trades
6. Breakout Trading
Characteristics:
- Low to medium frequency
- Catches momentum moves
- High win rate when working
- Can have extended losing streaks
Recommended Configuration:
MoneyManagementStrategySettings:
# Mode 1 with capped growth
Sequence: [1, 2, 4, 6, 8, 10, 12, 15]
Mode: 1 # Ride winning momentum
Why This Works:
- Breakouts often cluster (trending markets)
- Mode 1 capitalizes on winning streaks
- Capped growth prevents over-leverage
- Resets quickly when trend ends
Capital Requirements:
- Minimum: $5,000
- Recommended: $15,000+
- Max position: 4% per trade
7. Mean Reversion Trading
Characteristics:
- Medium frequency
- Counter-trend entries
- Moderate win rate (50–60%)
- Quick exits
Recommended Configuration:
MoneyManagementStrategySettings:
# Stepped Fibonacci - Conservative recovery
Sequence: [1, 1, 1, 2, 2, 3, 3, 5, 5, 8]
Mode: 0
Why This Works:
- Provides stability during choppy markets
- Multiple attempts at each level
- Mean reversion can have prolonged drawdowns
- Conservative approach matches strategy risk
Capital Requirements:
- Minimum: $3,000
- Recommended: $10,000+
- Max position: 3% per trade
8. News Trading / Event-Driven
Characteristics:
- Low frequency (specific events)
- High volatility
- Unpredictable outcomes
- Large potential moves
Recommended Configuration:
MoneyManagementStrategySettings:
# Flat sizing recommended
Sequence: [1, 1, 1, 1, 1, 1, 1, 1]
Mode: 0
# Too unpredictable for scaling
Why This Works:
- News events are uncorrelated
- Each trade is independent
- Risk management via position size limits
- Prevent emotional scaling decisions
Practical Examples
Example 1: Conservative Swing Trader
Profile:
- Capital: $10,000
- Base position size: $300 (3%)
- Win rate: 55%
- Average 3–4 trades per week
Configuration:
MoneyManagementStrategySettings:
Sequence: [1, 1, 2, 3, 5, 8, 13]
Mode: 0
General:
InitialTradeAmount: 300
MinBalance: 2000 # Stop trading if balance drops below
MaxBalance: 50000 # Stop scaling if balance exceeds
Sample Trade Sequence:
Trade 1: Win → $300 × 1 = $300 profit
Trade 2: Win → $300 × 1 = $300 profit
Trade 3: Loss → $300 × 1 = -$300 loss (1 loss)
Trade 4: Loss → $300 × 1 = -$300 loss (2 losses)
Trade 5: Loss → $300 × 2 = -$600 loss (3 losses)
Trade 6: Win → $300 × 3 = $900 profit (back to 0)
Trade 7: Win → $300 × 1 = $300 profit
Net: +$300 (even though only 4/7 wins = 57%)
Example 2: Aggressive Day Trader
Profile:
- Capital: $5,000
- Base position size: $200 (4%)
- Win rate: 65%
- Average 15–20 trades per day
Configuration:
MoneyManagementStrategySettings:
Sequence: [1, 2, 3, 5, 8, 10]
Mode: 1 # Capitalize on high win rate
General:
InitialTradeAmount: 200
MinBalance: 1000
MaxBalance: 20000
Morning Session Example:
Trade 1: Win → $200 × 1 = $200 (1 win)
Trade 2: Win → $200 × 2 = $400 (2 wins)
Trade 3: Win → $200 × 3 = $600 (3 wins)
Trade 4: Loss → $200 × 5 = -$1000 (back to 0)
Trade 5: Win → $200 × 1 = $200 (1 win)
Trade 6: Win → $200 × 2 = $400 (2 wins)
Net: +$800 profit
Key Point: High win rate allows aggressive scaling on wins.
Example 3: Position Trader - Monthly Setup
Profile:
- Capital: $50,000
- Base position size: $1,000 (2%)
- Win rate: 52%
- Average 2–3 trades per month
Configuration:
MoneyManagementStrategySettings:
Sequence: [1, 2, 3, 4, 5, 6, 7, 8, 9, 10]
Mode: 0
General:
InitialTradeAmount: 1000
MinBalance: 10000
MaxBalance: 0 # No upper limit
6-Month Scenario:
Month 1: Loss → $1,000 × 1 = -$1,000
Month 2: Loss → $1,000 × 2 = -$2,000
Month 3: Loss → $1,000 × 3 = -$3,000
Month 4: Win → $1,000 × 4 = +$4,000
Month 5: Win → $1,000 × 2 = +$2,000
Month 6: Win → $1,000 × 1 = +$1,000
Net: +$1,000 (3 wins, 3 losses = breakeven trades but profit)
Risk Management
Capital Requirements by Max Multiplier
| Max Multiplier | Minimum Capital | Recommended Capital | Max Drawdown Risk |
|---|---|---|---|
| 5x | $2,000 | $5,000 | -25% |
| 10x | $5,000 | $15,000 | -35% |
| 20x | $15,000 | $50,000 | -50% |
| 50x | $50,000 | $150,000 | -70% |
Safety Guidelines
1. Set Balance Thresholds
General:
MinBalance: 2000 # Stop trading at this level
MaxBalance: 100000 # Stop scaling at this level
2. Calculate Maximum Consecutive Losses
# Formula: Maximum safe consecutive losses
Max_Losses = log(Total_Capital / Base_Position) / log(Average_Multiplier)
# Example:
# Capital: $10,000
# Base: $300
# Avg Multiplier: 2.5
Max_Losses = log(10000/300) / log(2.5) ≈ 3.8 losses
# Keep sequence length under 4 steps
3. Position Size Rules
- Never exceed 5% per trade
- Total exposure (all open trades) < 20%
- If using Mode 1, start with 1–2% base size
4. Emergency Circuit Breakers
# Implement these checks:
- Daily loss limit: -5% of capital
- Weekly loss limit: -10% of capital
- Consecutive losses: Stop after 5 in a row
- Drawdown from peak: Stop at -20%
Troubleshooting
Issue 1: Position Sizes Too Large
Symptoms:
- Hitting broker position limits
- Emotional stress from large positions
- Account balance swings wildly
Solution:
# Reduce sequence multipliers
# Before:
Sequence: [1, 2, 4, 8, 16, 32, 64]
# After:
Sequence: [1, 2, 3, 5, 7, 10, 12]
Issue 2: Not Recovering from Losses
Symptoms:
- Sequence too conservative
- Takes too long to recover
- Missing good opportunities
Solution:
# Increase progression rate
# Before:
Sequence: [1, 1, 1, 2, 2, 3, 3]
# After:
Sequence: [1, 1, 2, 3, 5, 8, 13]
Issue 3: Sequence Wraps Around
Symptoms:
- Hitting sequence length limit
- Position resets unexpectedly
- Extended losing streaks
Solution:
# Extend sequence with plateau
# Before:
Sequence: [1, 2, 3, 5, 8]
# After:
Sequence: [1, 2, 3, 5, 8, 13, 21, 21, 21, 21]
# Holds at max multiplier
Issue 4: Wrong Mode Selection
Symptoms:
- Mode 1 with low win rate = shrinking positions
- Mode 0 with high win rate = missed opportunities
Solution:
# Low win rate (<55%): Use Mode 0
MoneyManagementStrategySettings:
Sequence: [1, 1, 2, 3, 5, 8]
Mode: 0
# High win rate (>60%): Use Mode 1
MoneyManagementStrategySettings:
Sequence: [1, 2, 3, 5, 8, 13]
Mode: 1
Issue 5: System Disabled
Symptoms:
- All positions stay at base size
- No scaling happening
- Logs show "money management disabled"
Check:
# Make sure sequence is not empty
MoneyManagementStrategySettings:
Sequence: [] # This disables money management
# Should be:
MoneyManagementStrategySettings:
Sequence: [1, 2, 3, 5, 8] # Enabled
Mode: 0
Quick Reference Card
Mode 0 (Recovery) - Most Common
# Conservative
Sequence: [1, 1, 2, 3, 5, 8, 13]
Mode: 0
# Moderate
Sequence: [1, 2, 3, 5, 8, 13, 21]
Mode: 0
# Aggressive
Sequence: [1, 2, 4, 8, 16, 32, 64]
Mode: 0
Mode 1 (Momentum) - High Win Rate Only
# Conservative
Sequence: [1, 2, 3, 4, 5, 6, 7]
Mode: 1
# Moderate
Sequence: [1, 2, 4, 6, 8, 10]
Mode: 1
# Aggressive
Sequence: [1, 2, 4, 8, 16, 32]
Mode: 1
Final Recommendations
Beginner
MoneyManagementStrategySettings:
Sequence: [1, 1, 1, 2, 2, 3, 3, 5]
Mode: 0
Intermediate
MoneyManagementStrategySettings:
Sequence: [1, 1, 2, 3, 5, 8, 13, 21]
Mode: 0
Advanced
MoneyManagementStrategySettings:
Sequence: [1, 2, 4, 8, 16, 32, 64]
Mode: 1 # Only if win rate >60%
Testing Checklist
Before going live:
- [ ] Test in demo mode for minimum 30 days
- [ ] Track actual consecutive win/loss streaks
- [ ] Verify position sizes are correct
- [ ] Confirm sequence matches your capital
- [ ] Set MinBalance and MaxBalance
- [ ] Document your maximum acceptable loss
- [ ] Have emergency shutdown plan
- [ ] Review trades weekly for optimization
Remember: Money management enhances a good strategy but won't fix a bad one. Always focus on strategy quality first, money management second.