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Money Management Explained in a Few Simple Words

Money management involves a number of things and it is not to be confused with trade management. Money management is static. It deals with things like deciding the size of your margin account; deciding how much of your account you will put at risk on any one trade; deciding where to place your stop; and deciding on fixed objectives.

The main purpose of money management is to save you from a disastrous trade. Money management is what you use to limit losses. Is that not a good understanding of money management? My personal definition of successful money management is to limit losses while at the same time providing you with an adequate opportunity to realize a profit from the trade.

Money Management is very important and each trader has to make sure he understand at least the basic principles (don’t worry; you don’t have to be a mathematical genius to understand the basics).

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Tuesday, 23 July 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.