|
|
Money ManagementI believe that money maangement is the single most important factor in determining whether or not you make or loes money in trading. It is far too easy to start with too high a risk on each trade, or to increase your trade size too much once you make your initial profits. Then a loss comes along and you get wiped out. Money management is about knowing how much of you capital you are risking on each trade. Standard advice is only to risk around 2% to 5% of your capital on any given trade. With systems that have a very high win-lose ratio, it may be OK to increase the amount risked, but you must understand that it will then take a shorter string of losing trades before you are wiped out. Remove a proportion of your profits on a regular basis It is good to allow your trading bank to grow, but do take some of the profits out. There is no guarantee that any trading system will work for ever and it is very disheartening to see your profits dwindle before you have been able to benefit from them. Money management should be documented as part of your trading plan. Don't let your emotions get the better of you. |