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Great site Kenny.

Technical Analysis written in a straightforward way so that everyone understands.

There's only a small few who get it consistantly correct and you are certainly in that group. Chris

Thanks for putting this all together and sharing! BHW

Awesome Stuff! Kenny has shown time and time again the ability to show us direction in these markets. Khalsa

Kenny, I appreciate your insight and analysis. You make sense of what I can rarely see.

Thanks for sharing.

Took a gold short at 1240 just closed at 1203 :-)))))))))))))))))) ........ top call!!  Gekko

Trading Money Management Systems

Learn Stock Market Trading Money Management

Trading Money Management Systems

A stock market Trading Money Management System - What is it, how do we do it, what is it for and does it work?

However large or small a traders portfolio, the principles are the same...

Successful stock market traders can consistently make money even if their win-lose ratio is no more than that 50% that can be achieved through the flipping of a coin as a trading strategy, simply by trading with money management and ensuring that their gains are significantly higher than their losses.

By contrast, a trader can have a significantly higher win to lose ratio and still lose money overall. If the losses incurred are not limited and kept to a minimum, gains made from many trades can be completely eroded on one bad trade. Weeks or perhaps months worth of hard earned profits can simply disappear in a very short period of time if losses are allowed get out of control.

What is Trading and Investment Money Management

A Trading Money Management system is an often overlooked part of a stock market trading strategy. The vast majority of traders focus entirely on their potential profit from a trade and tend to overlook the risks from potential losses that could be incurred from that trade if it goes against them.

A successful trader will always consider the potential losses in conjunction with potential gains before entering any trade. In contrast to the majority of traders, they will always place greater emphasis on their potential loss than they do on what they may stand to gain.

Small Losses + Big Wins = Successful Trading

Ensuring that losses are kept to a minimum is an essential part of this simple, but effective equation.

In order to become consistently successful, it is essential for traders to develop their own stock market Trading Money Management System that they are comfortable with, and suits their individual style of trading. A day trader will be able to tolerate a much smaller potential loss on each trade, than a position trader who is investing for the long term.


Free Excel Trading and Investment Money Management Worksheet with Trading Position Size Calculator

Learn Successful Trading and Investment Money Management Systems with our free excel worksheet.

The easy to use worksheet is for planning trading position size in stock market trading and investment strategies with Stocks and Shares, Forex, Commodities and Futures, Options and CFDs and will help anyone to learn about trade position sizing in Money Management strategies. 

Traders Day Trading Money Management Worksheet

Trading Money Management System - Tolerance of Risk

Every one of us has our own individual levels of tolerance to risk before it starts to affect our sense of good judgment so it is important to find the level at which we are comfortable with as individuals. There are two factors in this part of the equation, losses in monetary terms, and losses in terms of points and how wide our stop loss levels should be.

For a market with an average daily range of say 13 points, one day trader may see 1-2 points as an acceptable risk whereas another trader may find that their trading strategies may return a high proportion of wins, but generally incur a wider draw down before the trade moves into profit.

In this case it is imperative that the trader maintains the balance of the equation by adjusting trade position size to accommodate the wider stop loss levels to ensure that the potential loss remains in proportion. This smaller trading position size will of course reduce the potential gains form the trade but no trader will ever go bust by making a profit! It then becomes a discussion about the varying degrees of success, rather than the immediate problem of consistently losing money.

Successful Day Trading Money Management

There does come a point when the margin of error becomes so wide that a trade must be considered as a slightly longer swing or a position trade rather than a short term day trade.

In our example of a market with an average daily range of 13 points, for a day trader who may be looking for a short term move of only 3-5 points intraday, simple arithmetic confirms that
risking perhaps 10 points or more on a single trade, means the trader then needs to have a trading strategy that has a win-lose ratio of up to 3-1 just to break even over any period of time.

This in turn, severely limits the degree of success that this trader is ever likely to achieve, as the maximum potential is obviously a completely unrealistic 100%. They would then need at least a 66% win ratio just to break even so it would not leave much potential for achieving any significant profit.    


Successful Stock Market Trading Money Management Systems

In addition to employing a Trading Money Management system for individual trades, in stock market trading it is important to have a wider Money Management system for controlling the overall effects of those trades on the bigger picture. Their system should help traders answer specific questions like these, in order to help them develop their successful stock market Trading Money Management strategies that suits them individually...

  • What time frame is my tolerance of risk best suited to?
  • Is it wise to be fully invested at any period of time?
  • What is the maximum position size that I am comfortable with?
  • How many consecutive losses is acceptable?
  • What is the maximum consecutive monetary loss that is acceptable?
Learn more about trading  position size calculations for trading and investment money management systems.


trading money management
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