What is money management

[dhody1]

Money Managment is THE FUNADMENTAL requirement of any trader. Thanks for such an informative article. Deepak

 

[profit13]

Good money management starts with good planning.

 

[rocky9281]

Money Management for traders trading from home

If you use the following 3 criteria , u will be able to survive the market. That's a guarantee.

Suppose you have Rs.36,000 in your trading account.

You see a stock that is selling at Rs.29 and is in a number 2 spring position with an upside potential (point and figure chart indication ) of Rs.38 . So, you basically have 9 points profit potential. Your maximum risk can be 3 points......that would give you a 3:1 reward risk ratio. However, you determined that you can put your stop a little closer...lets say 2 points below the current price action. So, your first criteria has been met.....you are within the 3:1 reward risk ratio....you are actually better than that.

Now move to the second criteria, which is to risk no more than 8% on any one trade. If you were to buy the stock at Rs. 29 , and it were to drop by 2 points, that is about a 6.8 percent loss.....so you are below the 8 %.....that is good.

And now, the final criteria....and possibly the most important. How much stock should you buy. Well, you know that you can only lose 2% to your account, so, 2% of Rs.36,000 is Rs.720......so your total loss to your account can not be more than Rs.720.....you now divide your risk (2 points) into Rs.720 to determine how much stock to buy. 720 / 2 = you can buy 360 shares.

Lets check this: 360 shares purchased at Rs.29 = Rs.10,440
Stock drops to Rs.27, Rs.27 X 360 = Rs.9720
Rs.10,440 - Rs.9720 = Rs.720

So, using this method, you know how much stock to buy. The closer your stop. the more stock you can buy...the further away, the less.
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[starzz]

Re: Money Management for traders trading from home

If you use the following 3 criteria , u will be able to survive the market. That's a guarantee.

Very useful post thanks dear:clap:

 

[jerryjezza]

Nice to read this Article.in my opinion is that Money management is a term that has different meanings depending upon which players you are talking with. For some players the term money management is used to describe a betting system or a way of placing bets that they hope will somehow give them a way to beat the house. Other players use the term to describe how they manage their bankroll.

 

[manishkale24]

Zee Entertainment's Advertising revenue grew 36.4% YoY primarily driven by sports segment says Motilal Oswal report

 

[expertadvisor]

Oh, so unexpected, so surprise! Very touching, so well written and I have some perception, learning very much. Thank you for sharing. Very happy to see these and believe that your point of view.

 

[mochin]

interesting

 

[Subhadip]

the money management is the most important thing in a traders life

use money carefully.. preserve it ..before u can make it big

 

[munde_77]

Preserving your capital is more important than capital appreciation