The classic money management method: the "Piranha" 2% and 6% management guidelines

The piranha is a tropical tampon, not much bigger than a man's hand, but with two rows of sharp teeth. The fish doesn't look very dangerous, but if a dog, human or donkey falls into a tropical river, a school of piranhas will pounce on it, biting and biting, and the victim will not be able to resist it. If a bull walks into the water is attacked by a piranha, it only takes a few minutes for the skeleton to float up and down in the water. Traders protect against shark attacks with a 2% rule, but still need to guard against piranhas. The 6% rule will keep you from being killed by a small bite. - Elder

As market winners, professional traders dominate the core of trading is money management, risk control and trading strategy. They never bother with technical analysis, and the reason why they can make money lies in money management, risk control and trading strategy.

The appropriate steps for managing funds should be as follows:

Beginners who calculate profits first put the cart before the horse. They should calculate risk first. If you follow the 2% and 6% guidelines, ask yourself: What is the maximum allowable risk?

The appropriate steps for managing funds are as follows:

1. Measure the value of your account on the first day of each month - the sum of cash, cash-equivalent assets, and the balance sheet.

2. Calculate 2% of the trading capital, which is the upper limit of any transaction's risk tolerance.

3. Calculate 6% of the capital, which is the maximum allowable loss in any month. If you exceed this limit, you must level all trades and stop trading until the end of the month.

4. Each transaction must determine the entry point and the arrival point, expressed in terms of the amount of risk per share or per contract.

5. Take "2% of the trading capital" and divide it by "risk per share" to figure out how many shares or contracts you can trade. When taking whole numbers, take the lower number down.

6. Calculate the risk for all unflattened positions by multiplying the "distance from the entry point to the current exit point" by the "number of shares or contracts". If the total risk is 4% or less of the account, it may be possible to create another position, as the current trade will increase the risk by 2%, bringing the total risk to 6%. Remember: you don't have to take 2% risk per trade, you can take a lower risk if needed.

7. Only trade after all the above conditions have been met.

Piranha Funds Management Law:

1. Beginning funds = beginning funds of the previous period, profit and loss of the previous period (realized)

2. Total risk = opening capital * 6%

3. The maximum risk of a single transaction = the opening capital * 1%~ 2%

3. Unleveled risk = bid price - stop interest price or stop loss price

4. Reinvestable risk = total risk - unbalanced risk, realized profit and loss

5. Appearance = (realized profit and loss, inventory profit and loss) < -6%, flatten all parts, think about it, and wait for the opportunity.

6, the total risk should be revised with the judgment of the market, such as a million loss 60,000, in fact, it is also very hurt, so if you have doubts about the market, but not yet fully exit or empty, you may wish to reduce 6% to 3% or lower.

7. The principle of adjusting the total risk with the market trend: grab the rebound or short (the annual line is down) 1%, the rebound is established by 2%, the upper annual line is 3% (3 days), and the upper quarterly line is 4% (3 days). 6%.

In fact, whether it is a systematic transaction or a subjective transaction, the Piranha Capital Management Method is a very effective way to manage funds, allowing us to rationally evaluate risks, control transactions, and achieve stable growth of funds.