Trade Money Management – No Trader Can Succeed Without It!
The importance of money management in trading simply cannot be stressed enough. In fact, without trade money management, your chances of success are extremely slim.
Let’s face it; being successful in the markets is not something that just happens. It takes a lot of hard work, a solid plan, discipline, and a strong will to succeed. Contrary to what you may believe, traders aren’t born with a gift. They’ve simply dedicated plenty of time to learning, as can anyone else. As Dr Van Tharp says, “Successful trading is all about psychology and mindset”.
Cutting losses and allowing profits to run, is a fundamental rule which all successful traders follow but I can assure you, it’s easier said than done, particularly when you’re in the thick of it and you’re experiencing a string of losses. In fact, without a proper trading psychology, every bone in your body will be telling you to let your losses run, as you desperately hope the tide will change before all is lost. This is exactly why no trader should fail to see the importance of a trading psychology.
If you haven’t learnt how to go against, you’ll need to.
Admittedly, there are thousands of ideal trade entries and equally as many money making opportunities in the markets but unfortunately, without a solid system in place, you’ll be sorely disappointed. Likewise, your system needs to be structured around effective trade money management in order to protect your capital. While systems may be 100% accurate in a perfect world, we don’t live in a perfect world so essentially, one bad loss to see you loose everything in the absence of money management.
Considering just how critical trade money management is, I find it alarming that it’s rarely even mentioned in courses. In fact, I’m yet to find a course which explains trade money management as it should be explained.
The fact is, there are plenty of stories which can attest to the importance trade money management so I’m obviously not the only one who knows about this. It’s just unfortunate that so little is said about it because trade money management needs to be applied, irrespective of what market you’re involved in, or which method you choose to use. The bottom line is; there are simply no exceptions to the rule, regardless of the system you use.
Trust me, knowing these trade money management rules is one thing, but actually applying them is a different ball game altogether. In fact, if your trading is not going quite as well as you’d hoped for, my guess is that a lack of discipline is to blame, with regards to money management in trading.
Irrespective of where you are with your trading, you only need to implement one change, and the result of that change will see you raking in profits.
Essentially, you need to thoroughly understand what you’re doing and also why you’re doing it. Having a rock solid system in place means you’ll no longer be dependent on gurus and tips as a source of information.
Primarily, you need to be confident when you enter into trade and the way to achieve that is by ensuring you have an effective exit strategy in place. Not only does this boost your confidence, but it also makes it possible to manage even the most aggressive portfolios. Above all, by ensuring your risks are well within your risk tolerance, you’ll also have a good night’s rest.
Before I end off, I just want to point out that I wrote this article essentially as an introduction to trading money management. The bottom line is; by implementing masterful trade money management, you will reach all your goals. In fact, simply following all my future articles and applying what you learn, you’ll soon be able to master the markets using excellent trade money management.
