Money Management

There are many books/theories/strategies out there that deal with money management. It is one of the key factors in trading. But I do believe that they very depending of the type of trader you are.

Some traders have no patience. They like to dive into the markets as quick and fast as possible, take their profit and run away. Small profit. Doing this ten times in a trading day and they are profitable as a medium term/long term investor. They need one money management strategy that is definitely different than the one a medium/long term investor has.

Other traders use the famous two percent rule. That is, they never risk more than two percent of their account on any given trade. If they are stopped out, they start again, the percentage remaining the same, but this time out of a smaller account size. After all, there’s nothing better than a fresh start.

And there are traders who use no stop loss. They go into the market and will react when the account balance reach a certain point, mainly hedging loosing positions until market proves the initial direction, and after the pullback, dumping the hedge and going aggressively forward.

In my experience, there is no secret formula to money management an no rules written can help a trader. Human nature plays so many tricks on us that what is valid today may seem totally bullshit tomorrow.

What I do believe in is that in order to be successful when trading, you need to know yourself exceptionally well, to be able to react promptly when needed, suffer moderately and enjoy moderately, put passion in what you do, and be patient. Patience always pays. And that is the best money management advice I can give you being totally honest with you.

With this our journey comes to an end and while I hope you can find it useful in preparing you for the trading world and opening your apettite for learning more, please feel free to right me your feedbacks and/or any potential questions you might have. I will review them all with pleasure and answer when possible with great pleasure.

Mircea Vasiu
[email protected]

Leave a Reply

Your email address will not be published.