|
Money management is a critical point
that shows difference between winners and losers. It was proved that
if 100 traders start trading using a system with 60% winning odds,
only 5 traders will be in profit at the end of the year. In spite of
the 60% winning odds 95% of traders will lose because of their poor
money management. Money management is the most significant part of any
trading system. Most of traders don't understand how important it is.
It's important to understand the concept of money management and
understand the difference between it and trading decisions. Money
management represents the amount of money you are going to put on one
trade and the risk your going to accept for this trade.
There are different money management strategies. They all aim at
preserving your balance from high risk exposure.
First of all, you should understand the following term Core equity
Core equity = Starting balance - Amount in open positions.
If you have a balance of 10,000$ and you enter a trade with 1,000$
then your core equity is 9,000$. If you enter another 1,000$ trade,
your core equity will be 8,000$
It's important to understand what's meant by core equity since your
money management will depend on this equity.
We will explain here one model of money management that has proved
high annual return and limited risk. The standard account that we will
be discussing is 100,000$ account with 20:1 leverage . Anyway, you can
adapt this strategy to fit smaller or bigger trading accounts.
Download:
Right Click on the PDF image below to then click "Save
Target As..." from the drop-down menu.
|
