Stocks, Forex, Futures, Options, Commodities or whatever you trade. A Successful trading consists of three factors as follows:
- Psychology for 50%
- Money Management for 30%
- Market Analysis and Trading Systems for 20%
For many traders, they spend most of their time looking for good trades and only focus on the last factor, Market Analysis and Trading Systems, which is the least influence on successful trading.
Once traders enter a trade, they rely on their emotions to make their decisions and miss the essential element of winning, the management of their emotions. Their lacking of managing themselves leads to poor managing of money of their trading portfolios.
That’s why most traders are a failure.
Without a method of managing your money, even the best trading system or strategy is absolutely worthless. The 100%-win system does not exist, therefore the strict rules to manage money will provide a safety net for traders.
That’s why the money management is so important in trading.
The major goals of money management rule are:
- Ensuring survival in markets – No one never fails, so traders have to stay in markets long enough to win
- Earning steady rate of return from the trades – the volatility of earning rate from each trade should be low
- Earning high return from the trades – traders are able to get high returns with no risks or lower risks if they manage their money well
Lastly, A most importance rule of managing your trading money is Do not change money management rule while the opened position is not yet closed.
Taro is an experience trader who trades in stocks, futures, forex. He strongly focuses on technical analysis, trading systems and money management.
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