The greater staying power of traders the greater chance to win. Traders have to stay in markets long enough to win trades. Money management plays an important role in helping traders to survive in markets.
No one win every trades; money management help traders to reduce losses on losing trades. Moreover it also maximizes traders' gains on winning trades.
All traders have ever heard about how important the money management but the most of them are still losing in understanding money management strategies.
To make traders clear and be able to find strategies of managing money that suit to them. Let us talk about a couple of simple and easy money management rules.
The 2% - 6% rules of have been introduced in Dr. Alexander Elder's book "Come Into My Trading Room"
The 2% rule is to protect traders from any single terrible loss that can damage their accounts. With this rule traders risk only 2% of their capital on any single trades. This is for limiting loss to a small fraction of accounts.
Besides a disastrous loss, a series of losses can also damage traders' account. The 6% rule is lent to handle this. Traders have to set the maximum of accumulated loss for a month. When they reach that level of loss, they have to stop opening any new position for rest of the month.
These 2 rules are designed to protect traders from the two types of losses. Nevertheless the 2% - 6% would be change for each trader. For those who are able to accept the higher risk, they might adjust the 2% - 6% rules to 5% - 10%, where the 5% is used to protect the account from any single disastrous loss. While the 10% rules is used to protect traders from any series of losses in each month.
No one win every trades; money management help traders to reduce losses on losing trades. Moreover it also maximizes traders' gains on winning trades.
All traders have ever heard about how important the money management but the most of them are still losing in understanding money management strategies.
To make traders clear and be able to find strategies of managing money that suit to them. Let us talk about a couple of simple and easy money management rules.
The 2% - 6% rules of have been introduced in Dr. Alexander Elder's book "Come Into My Trading Room"
The 2% rule is to protect traders from any single terrible loss that can damage their accounts. With this rule traders risk only 2% of their capital on any single trades. This is for limiting loss to a small fraction of accounts.
Besides a disastrous loss, a series of losses can also damage traders' account. The 6% rule is lent to handle this. Traders have to set the maximum of accumulated loss for a month. When they reach that level of loss, they have to stop opening any new position for rest of the month.
These 2 rules are designed to protect traders from the two types of losses. Nevertheless the 2% - 6% would be change for each trader. For those who are able to accept the higher risk, they might adjust the 2% - 6% rules to 5% - 10%, where the 5% is used to protect the account from any single disastrous loss. While the 10% rules is used to protect traders from any series of losses in each month.
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