Today I'm gonna talk about Money Management. I hope that everyone who trades is aware of the concept. However it's such an important concept, getting it in your head over and over again is key.
Yesterday i talked about Drawdown and how it is a naturally occuring process everyone has to live with. The only time it gets really dangerous is when you do not have the proper Money Management.
Lets say you trade contracts with a Stop-Loss so huge that if you loose you loose 10% of your Equity. Yes you can win way more with huge positions and a wider SL can turn a loosing position in a winning one.
With 10% every trade you loose half you account with a loosing streak of 5 times in a row. And thats actually pretty easy if you trade 1000 times a year.
So keep this in mind: Never ever trade more than 1-5% of your current balance or you will ruin your account eventually!
Yesterday i talked about Drawdown and how it is a naturally occuring process everyone has to live with. The only time it gets really dangerous is when you do not have the proper Money Management.
Lets say you trade contracts with a Stop-Loss so huge that if you loose you loose 10% of your Equity. Yes you can win way more with huge positions and a wider SL can turn a loosing position in a winning one.
With 10% every trade you loose half you account with a loosing streak of 5 times in a row. And thats actually pretty easy if you trade 1000 times a year.
So keep this in mind: Never ever trade more than 1-5% of your current balance or you will ruin your account eventually!
