Perhaps one of the most important aspects of trading is money management. For many traders, especially beginners, this is a strange concept since the majority focuses on finding the strategy “perfect”, ie one that allows them to win all the time, which of course does not exist.
We must first understand that the market will be times when we lose, that’s inevitable, and it is best to get an idea. Basically, the question is not whether or not we lose one day, but we will do when that happens. The logic here is to limit the losses so that they do not have an excessive impact on our balance sheet, ie the end we won exceeds the loss.
This is precisely the monetary management, to manage our capital to that in case of loss, they are not too large. Proper money management strategy allows us to set a maximum loss per trade according to the capital we have. In fact, according to experts, at no time did we risk more than 2% of our account in the positions we have open.
Thus, we make our money go further and increase the chances of being profitable in the long term. Without proper money management, even the best trading strategy will end in failure because we lost probably when they will be very strong.
It’s a proven fact, that even a trading strategy with an average yield of 50% for instance, you can make money for the operator if applicable even basic money management concepts. By contrast, a very successful strategy, yielding up to 70% may fail but we manage our capital and operating properly controlling risk.
Despite its importance, this aspect of trading is one of the least studied by novice operators, which are constantly looking for magical solutions that will avoid losing money. However, many would avoid unnecessary loss, headaches and disappointments if they took the time to learn at least some stories money management principles. At least in some cases may maintain their operating accounts longer.
If we look at trading as a business, which is in fact, we view money management as how to manage the business by controlling the risk at the same time. If we have a company and invest our money without any control or measure, will not be long before we met on the street. In the case of trading, something similar happens.
If we develop a good trading strategy, we take the emotions of our operations and above all learn to manage money from our account, the chances that the market actually generate money for us will be much higher. As in everything related to the market, there are no guarantees, however we can put the odds in our favor, which is what this business is.
