Capital Management and Return in Professional Forex Trading: A Quantitative Approach to Leverage, Correlation, and Overnight Risk

This paper examines advanced capital management techniques for professional forex traders, moving beyond fixed fractional methods. We quantify the impact of dynamic position sizing based on realized volatility, correlation between currency pairs, and real-time drawdown thresholds. A comparative analysis of the Kelly Criterion, Optimal f, and Risk of Ruin models is presented, adjusted for the unique leverage and liquidity characteristics of the forex market. Behavioral biases—specifically loss aversion and overconfidence—are integrated into a decision framework for stop-loss placement and equity allocation. Empirical backtesting on major and exotic pairs demonstrates that a volatility-scaled, multi-asset approach improves risk-adjusted returns (Sharpe ratio) by up to ۲۸% while reducing maximum drawdown. The paper concludes with a practical decision matrix linking trade horizon, average true range, and portfolio beta. These findings provide a replicable, quantitative foundation for systematic capital allocation in institutional and professional retail forex environments.

کلیدواژه ها:

Forex market ، technical analysis ، risk management ، monetary policies