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Importance of Money Management

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Old 19th July 2006, 08:35 AM
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Default Importance of Money Management

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.



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Old 21st July 2006, 10:49 PM
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Default Re: Importance of Money Management

Update :
This morning i.e. July 21,2006, they did the same exercise between 8:30 - 12 P.M. and here are the results.
Total Trades: 41
Winners: 16
Losers: 16
Breakeven : 9
Bottom Line: + $ 1493.20 after commissions

I forgot to mention one important rule. If the trade goes 10 ticks in favor, put the stop loss at break even+1 tick.

Happy trading
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Old 8th July 2013, 03:37 PM
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