“All statistics have outliers. Money management, therefore, is key to the process of good trading.”― Yvan Byeajee, Paradigm Shift: How to cultivate equanimity in the face of market uncertainty
One of the most important things about trading, money management. Money management, however, does not apply only in trading, it actually applies in business and daily lives too. It is a skill that most people neglect it. Poor money management leads to having countless of
Debts, stress level keeps going up due to paying debts and worse it can cause your health failing.
In trading, your portfolio can have a very good win-loss record, like 16 win trade and 2 lost trade. That sounds great, right? However, if you did not manage your money properly, your account may not be profiting money. Vice versa, you can have a lot of loss trade, a few winning trades and your portfolio still winning money on it.
The link below is very good explanations of Good and Poor Money Management.
A good ratio of profit and loss, risk management of the trade are the keys to stay in the game.
When you are in the trading world, take note that it is a marathon, not a 500m race, where money management is a part of winning the marathon. A good record is not the main focus, profiting money from trade is the main focus. That’s the reason why you want to trade right? Profit for money.
There’s a reason that money management is always neglected because our emotions always take over from it. Impulse buying, fear and greed will come along when applying money management. It hones through practices. Humans tend to be prone to emotion over logic.
So how to practice money management skills on it? This link below is a great tip for daily life uses:
For me a few years ago, I opened a $100 trading account and set a goal not to lose my capital in 1 year, which is quite effective.
Remember, good money handlings lead you to a greater height of your trading and life. Poor money management will bankrupt you no matter how rich you are. I will end this post with the quote:
“When money realizes that it is in good hands, it wants to stay and multiply in those hands.”
― Idowu Koyenikan, Wealth for All: Living a Life of Success at the Edge of Your Ability