Money Management 101

SELF DEVELOPMENT/METHODOLOGY/PSYCHOLOGY

Money Management 101

Are you receiving a win-rate of more then 60% and still loosing money?? Money Management may be an area that you need to focus on. It is an essential element in becoming a professional trader. Listed below are 4 Simple Steps To Evaluate Your Financial Health;

1. Position Sizing
A portfolio of $... and I decide to only risk 2% on a trading strategy
2. Capital - How much?
A portfolio of $....
3. Loss - How much?
I must be right more then 50% of the time, but win more money on winning trades versus losing trades. I will use stops and limits to enforce a risk/reward ratio of 1:2 or higher
4. Profits - What?
A profit/loss ratio refers to the size of the average profit compares to the size of the average loss per trade. For example, if your expected profit is $1500 and your expected loss is $500, the P/L ratio is 3:1

Please let me know if you have any questions :) Happy Trading

"The simpler it is, the better i like it" Peter Lynch