.: Money Management
Money management is critical to your short term and long term success as a trader. Without it your mistakes will cost you more and can knock you out of the game or upset your trading phycology in such a way that is difficult to recover.
Great traders know the risk involved in every trade that they enter and are willing to pay that price. They know that even if they lose this trade it will not have a serious effect on their trading account. No gambling, bet the farm trades or positions with huge risk and low probability of reward.
You have heard this many times. Only risk a small percentage of your trading capitol on any trade. No matter how sure you are that you are right you can not control the market and to trying to do so only gives you stress and effects you’re trading.
You want to be relaxed, focusing on the outcome that you want and not nervous that each trade has to win. Desperation attracts Loss, Clear Focus attracts Profits
Learn what you are trading and how to effectively use stop losses to minimise losses with out getting taken out of the trade by a small bounce. Spending time to get to know your market allows you to effectively set stop losses.
LIMIT YOUR LOSSES AND LET YOUR PROFITS RUN
LIMIT YOUR LOSSES AND LET YOUR PROFITS RUN
LIMIT YOUR LOSSES AND LET YOUR PROFITS RUN
This one sentence if thought about and applied as a rule will save you a lot of money over the length of your trading career. This will allow you to consistently take profits from the market and keep them. Gamblers always give their winnings back, great traders keep a percentage of their profits in income producing passive investments.
Whenever you enter a trade know what the maximum risk is and be prepared to pay that and only that. Do your research and know at what point the trade has gone against you and act swiftly with your pre determined exit strategy to minimise the loss.
Long term, set up a separate account to keep your profits in. This helps you to keep the money that you have made and allows you to start to build some passive investments so the money will keep flowing in even if you are not trading.
Know what you want from your trading, have a long term strategy so that you will always have a nice income whether you are trading or not. Do you want to trade for ever, trade until you have x amount of dollars. What is it that you personally what from trading?
This is part four of 7 essential lessons to being a great trader. For the Full Free Ebook go to http://www.highgrowthtrades.com
Mark Slattery
http://www.highgrowthtrades.com
Article Source: http://www.articles32.com
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