Money Management

Money Management is the single most important thing in trading. It is the difference between succeeding long term and failing. You must have a trading plan and you must stick to the plan. This is easier said than done. The true test of a trader is how well they can stick to the plan.


Money Management
What is Money Mannagement?
Money management will help you to survive in the market and play only the trades
where the odds are in your favor! It will assure that you will be a winner in the long run!
Parameters:
Entry Level:
The price you get in the market. (called EP)
Risk:
The amount you risk to lose if your stop loss is hit. (called R1)
This amount is never (NEVER) above 1% of your portfolio!
Price Target:
This is the price you get out of the market. (called T1)
Reward:
This is the amount you will gain. (called R2) T1 - EP = R2
Before you enter a trade you have to consider the following Parameters / Thoughts:
Is now the right time to buy? (Is this a buying point? How is the market?)
Which price target is realistic? (without hoping)
Can I place a logical stop loss not too far away from the entry point? (this will definitely give me a smaller risk)
The 1,000% story!
This story is true, but only if you are committed to your rules and hold strictly to them!
Assumptions:
You accept the principles of money management and you also walk the talk!!!
You trade equal or better 6 out of 10 trades. 4 losers / 6 winners
2.0 ">You only take good trades with good odds. Reward (R2) => 2.0
You trade with the market.
You don't want the 1st or last 10% of a trend. (and again you walk the talk!!)
And here is the story:
You trade 10 times a week.
=
10 Trades
4 losers with maximum -1% loss
=
-4.00%
6 winners with average 4% reward
=
24%

Total
20%
Profit/week
50 weeks times 20%
=
1000%
Profit/year

Welcome to my Blog

Hi,
I have begun to create a financial investment course. I will be setting up a website and pulling together the content to get an investor started. My goal is to show how to use the tools available on the Internet for little or nothing to generate a 4% return on a monthly basis. The process will include fundamental analysis, technical analysis and the use of options as well as money management.
I will post updates to this blog as I go along to keep everyone informed on the progress of the website and to discuss the site as well.
I look forward to an exciting year ahead.