Edward Kingston asked:
Trading the futures markets can be a very lucrative profession. Many people are attracted to it because it is the only profession out there that allows a person to make unlimited sums of money with limited capital, if done the right way. That is because traders use something called leverage a lot in the futures trading arena. It simply means that you can control a significant amount of money with just a little amount of actual cash in your trading account. This is a double edged sword. That is because it can not only help a trader double or even triple his or her account in one single trade but it can also make a trader lose much more than the amount originally placed in the account.
To avoid such catastrophic trading situations traders have to become excellent risk managers. By controlling the risk on each trade that a trader takes they are essentially assuming the position of a risk manager. This can also be called Money Management. The only thing a trader can control is the amount of money risked on each trade, nothing else. The market will do what it wants to do. The trader cannot force the market to do what he or she wants it to do. The market is always right.
That is why Money Management is so crucial for the financial well being of a trader. All professional traders understand this very well. They know that it is not their ability to pinpoint exact entries or exits in the market, but the act of managing their risk and money properly that will eventually get them the desired results. Even the simplest of trading strategies can be very profitable if money management is applied properly to it. A proper money management plan will also help in keeping the emotions such as fear and greed in check that are the root cause of destroying many trading careers.
Proper money management will keep a trader in the business for a long time. He will always be around to fight another day. Money management stops should be calculated by a trader based on his or her account size, risk tolerance level and trading objectives. If a trader loses say 50% of their account, they need to make 100% to bring the account back to its original position. Proper money management also helps a trader in setting a logical stop for all trades. This way a trader will not risk too much or too little on each trade and give each trade enough room to become a potential winner. Proper Money Management also allows a trader to choose the right market to trade according to the traders own risk profile and account size.
Because of all the reasons outlined above it is easy to come to the conclusion that disciplined money management can and does keep traders in the game for a long time which in turn lets them enjoy the fruits of trading for a long time to come.
Miguel
Trading the futures markets can be a very lucrative profession. Many people are attracted to it because it is the only profession out there that allows a person to make unlimited sums of money with limited capital, if done the right way. That is because traders use something called leverage a lot in the futures trading arena. It simply means that you can control a significant amount of money with just a little amount of actual cash in your trading account. This is a double edged sword. That is because it can not only help a trader double or even triple his or her account in one single trade but it can also make a trader lose much more than the amount originally placed in the account.
To avoid such catastrophic trading situations traders have to become excellent risk managers. By controlling the risk on each trade that a trader takes they are essentially assuming the position of a risk manager. This can also be called Money Management. The only thing a trader can control is the amount of money risked on each trade, nothing else. The market will do what it wants to do. The trader cannot force the market to do what he or she wants it to do. The market is always right.
That is why Money Management is so crucial for the financial well being of a trader. All professional traders understand this very well. They know that it is not their ability to pinpoint exact entries or exits in the market, but the act of managing their risk and money properly that will eventually get them the desired results. Even the simplest of trading strategies can be very profitable if money management is applied properly to it. A proper money management plan will also help in keeping the emotions such as fear and greed in check that are the root cause of destroying many trading careers.
Proper money management will keep a trader in the business for a long time. He will always be around to fight another day. Money management stops should be calculated by a trader based on his or her account size, risk tolerance level and trading objectives. If a trader loses say 50% of their account, they need to make 100% to bring the account back to its original position. Proper money management also helps a trader in setting a logical stop for all trades. This way a trader will not risk too much or too little on each trade and give each trade enough room to become a potential winner. Proper Money Management also allows a trader to choose the right market to trade according to the traders own risk profile and account size.
Because of all the reasons outlined above it is easy to come to the conclusion that disciplined money management can and does keep traders in the game for a long time which in turn lets them enjoy the fruits of trading for a long time to come.
Miguel
