Money Management Articles
01/17/2009
Risk and Reward
How do you determine proper risk and reward in trading? I don't think anyone can ever provide a definitive answer to that question because its is akin to asking how many layers do you need to walk outside of my apartment in New York City in the winter. Right now
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Money Management Articles
08/03/2007
The Single MOST IMPORTANT Aspect of Futures Trading
Okay, traders: Do you know what is the most important aspect of successful futures trading? Is it identifying the trading opportunity? Is it proper entry into the market? Is it the trading "tools" you are using? Is it an exit strategy that is the most important aspect of trading? The
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Money Management Articles
06/22/2007
Don't Hold Your Breath Too Long While Under Water
The headline of this educational feature pertains not to swimming but to trading. Most professional traders do not hold onto their losing positions for very long. Once a trading position goes "under water" most professional traders will immediately begin looking for an exit strategy
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Money Management Articles
06/01/2007
The Why Wall Street Doesn't Know About Position Sizing
This week I'm going to be a little controversial because I'm going to put forth some rather bold statements. First, it is possible with small amounts of money and a reasonable trading system to make outstanding rates of return (50-100% or more) through position sizing. Second, if you have too
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Money Management Articles
05/25/2007
The Importance of Position Sizing 2
You lose whatever you risk when tails comes up and you win twice what you risk when heads comes up. If R stands for you risk, this system is characterized by the two R-multiples it generates: 1) 1R (when you lose, you lose what you risk and R stands
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Money Management Articles
05/18/2007
The Importance of Position Sizing
I did a retreat with one of the world's greatest traders in 1989. At that retreat he talked about a simple trading system. It was a system in which you flipped a coin. If the coin came up heads, you won twice what you bet. If the coin came up
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Money Management Articles
04/05/2007
Position Sizing Continued
osition sizing is that part of your system that tells you
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Money Management Articles
03/30/2007
Position Sizing Is More Important Than You Think
Before we discuss this topic, let me give you some important background information. I tend to think of trading systems by the distribution of R-multiples that they generate. And the average R (or mean R) of the system's R-multiple distribution is the expectancy of the system. It tells you what
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Money Management Articles
04/13/2006
Every Trading System Can Be Described By the R-multiples It Generates
Last week I talked about determine your initial risk for each trade and how you could express your profit and losses as a ratio of that initial risk. I recommended that you always have a bail-out point before you enter into a trade, but if you haven't done that then
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Money Management Articles
04/07/2006
Start Thinking In Terms of Risk-Reward
One of the cardinal rules of good trading is to always have an exit point before you ever enter into a trade. This is your worse case risk for the trade. It's the point at which you would say, "something's wrong with this trade and I need to get out
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Money Management Articles
03/17/2006
Keeping Some Fire Power In Reserve
Reserves are funds in our account that are held back from trading, and usually parked safely on the sidelines in risk-less money-market instruments. The effect of holding reserves is to reduce net leverage. A workable rule of thumb that has evolved over time out of the real-world trading arena is
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Money Management Articles
03/03/2006
Pyramiding: A Risky Strategy
Pyramiding is adding to positions as price moves in the desired trend direction. Pyramiding is a highly aggressive trading strategy suitable only for full-time professional traders who know how to control risks and have the discipline to execute a tested plan consistently. Pyramiding should be executed only according a predetermined
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Money Management Articles
02/10/2006
Employing Protective Stops to Manage Your Trades
There is no absolutely perfect money-management tool in futures trading, although purchasing options on futures does limit your risk of loss to the amount paid for the option. Purchasing options does have its disadvantages, however, and I won't go into that in this feature. What I will focus upon in
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Money Management Articles
12/30/2005
Pyramiding ? When and When Not to Do it
A frequent question I get from less-experienced traders is: "Should I add futures contracts to my existing market position?" That's a broad question and there is no single right answer. So, let's break down the question into some scenarios.
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Money Management Articles
12/23/2005
Seven Time-Tested Money Management Rules to Insure Survival over the Long Run
1. Always Preserve Capital. Traders should limit loss to 1% of total capital for any one position. 2. Always trade in the direction of the larger trends, with the most emphasis on the Primary Tide that lasts many months or years. In a Bull Market, look only for opportunities to
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Money Management Articles
01/29/2005
Money Management by Joe Ross
There are some common mistakes I’ve seen traders make in the area of money management. First, let’s understand what money management is all about. Money management overlaps with risk, trade, business, and personal management, yet it has many aspects that make it unique, distinctly different from all of the other
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Money Management Articles
11/08/2004
Some Practical Thoughts About Money Management
We get a lot of questions about various complex money management (MM) formulas and our preferences. We don't comment on this subject very often because money management is such a personal issue that it would be impossible to give any universal advice that would be specific enough to have value.
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Money Management Articles
10/18/2004
Forex Money Management
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%
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