Money management is theee most important and also the most neglected (particularly by new traders)aspect of trading.
Last Friday, I was in a trading room and the moderator conducted this live experiment using live data (not using real money though). He flipped a coin. If it came up head, he would go long and tail would be short. He was always in the market. He would use a 10 tick stop loss and take 20 tick profit, whichever came first. He did this between the hours of 8:30 - 12 P.M. At the end of the period he had made $270.00 after commissions, even though at one time he had 7 consecutive losers and his winning percentage was only 37%.
Now don't go out and use this method of trading, it is not a method. He was trying to stress the importance of using strict stop loss and not making hasty exits. If you stay disciplined, you could make decent money even with a low percentage of winners.
Last Friday, I was in a trading room and the moderator conducted this live experiment using live data (not using real money though). He flipped a coin. If it came up head, he would go long and tail would be short. He was always in the market. He would use a 10 tick stop loss and take 20 tick profit, whichever came first. He did this between the hours of 8:30 - 12 P.M. At the end of the period he had made $270.00 after commissions, even though at one time he had 7 consecutive losers and his winning percentage was only 37%.
Now don't go out and use this method of trading, it is not a method. He was trying to stress the importance of using strict stop loss and not making hasty exits. If you stay disciplined, you could make decent money even with a low percentage of winners.