Trader’s Tips

Basic rules of money management Part 2

After a series of negative transactions, you need to take a break. How many negative trades will you need to make a timeout decision? Someone will stop trading after three unsuccessful transactions, and someone will stand his ground, despite the loss in five transactions. Much depends on trading tactics. There are a great many of them, and many of them will be effective if used properly. For one trader, one trading technique will be useful, while for another, it will only be harmful. There are unified truths that all speculators should be aware of. But there are also truths that are very important for some traders, but completely useless to others. It all depends on the degree of perception and processing of information by one or another exchange player.

  1. Make a trading plan. It should be clear, simple and clear. If you start to be wise, then you will definitely fall under the distribution of the market. What market do you want to work in? In foreign exchange? On stock or commodity? Why on it, and not on some other market? For what reason are many speculators unwilling to trade in this particular market? What do they know that you do not know? Maybe you don’t know anything at all, and you need to sit down for books first? You do not enter the ring against a professional boxer without proper theoretical and practical training. What makes you think that the market will give your money so simply? Beginners often trade without any plan. They do whatever they want. On the stock exchange, you need to do not what you want, but what you need. And that’s a lot harder. On the stock exchange, most traders part with capital. Give yourself the answer to the question: why are you better than most? What do you know that others do not know?
  2. Do not get carried away by frequent entrances and exits. Frequent entries and exits from the position will result in losses. In some cases, aggressive trading is justified. But even then it is necessary to observe the distance between the inputs – the outputs. The deal should be done for sure. At least she should have a good chance of success. In a strong bullish stock market, you can make many deals using secure pyramiding. Typically, this tactic is justified in the first two years of the bull market, then its pace slows down.
  3. 1: 2 – lose 10, and get $ 20. This rule may be useful, but not always. Some speculators are content with lower incomes, and some with more. A lot depends on what market you work in. There are traders who believe that it is impractical to maintain such proportions.
  4. Do not go against the trend. The trend is our friend. At least that’s what professional traders say. In some cases, you can move against the trend and make a profit. But such tactics are rather risky. Dissident speculators who act on the contrary can play against the trend in the currency market. Some of them say that the only way they can replay the market. But it is unlikely that you will succeed without the appropriate training and certain innate qualities. Only those traders who have certain necessary character traits can go the way of dissenters.
  5. Do not try to guess where the U-turn will be. In most cases, you will fail. Using Elliott waves, various oscillators and indicators, analysts are trying to identify pivot points. If you read speculation magazines, make sure that experts in most situations cannot identify the pivot point. Do not waste time and you are in this useless exercise. You do not have to constantly fall into the top ten, the main thing is to score a lot of points by firing shots. To get into the top ten, you do not want to do this, but you need to shoot correctly. So it is in trade.
  6. Averaging should not be. This will lead to a reset of your account. If a trader occasionally averages out, this can get away with him, but for the time being. Somewhere he will fall. Particularly dangerous is the “sell” averaging in the bull stock market and in any foreign exchange market.
  7. Keep earned. Have you got any money? Do you think that you risk not your money, but only earned? Believe me, this is not so. Earned money is yours. And you need to respect them. Learn to love your money. Even if you do not need them – do not give them to the market just like that. It is necessary to exit the transaction when the income on it grows, but not decreases. That is, when the financial elevator moves up, not down.
  8. Do not trade at night. Do not think that the market is going away from you somewhere. Only your money can get away from you. You will have plenty of opportunities to trade. At night, people should sleep. If you are a “night bird”, then you can work until late, but even then do not cross the line. You should get enough sleep. Trading is psychology in the first place. And the psyche will work effectively only if you rest. 22. Lead an active lifestyle. You can’t just spend days at the computer. Go to the gym. Game sports are especially good for the speculator. You must be distracted. You can visit the pool, water park, ice rink, etc.
  9. Lead an active lifestyle. You can’t just spend days at the computer. Go to the gym. Game sports are especially good for the speculator. You must be distracted. You can visit the pool, water park, ice rink, etc.
  10. Take huge profits in small portions. Would you like to make $ 1,000 out of $ 100? So you need to divide a large task into several small ones. First, you need to increase the account to $ 200, then to 300, etc. This does not mean that you should immediately risk 100 dollars. Making 200 dollars from 100, then 400, and then 800 is possible but very difficult. This probability of success is extremely small. And professionals never take such a big risk.
  11. Work with familiar tools. Do you have experience trading in the market? Which market do you prefer? If you are interested in products, then choose those whose movement is easier to predict. For example, if you are a specialist in the gold market, then trade this precious metal. If you have been trading securities for many years, then work with them.
  12. Choose the optimal leverage.

Leverage 1: 100 and even 1: 500 are offered by many brokers. This does not mean that you should use the maximum allowable leverage. In the stock market, leverage of 1:10 and 1:20 is used. Forex trading is usually 1: 100. If you trade at full capacity, then not a single dollar will be left from your money. Although, with small leverage, the trader can get bored.

  1. Learn to take losses easily. In order to easily accept losses, you must not allow them to increase to large numbers. Losses must be taken small and with a smile, and profits must be expected large. In the stock market, traders often use pyramiding. With this trading strategy, you can get a huge income. To do this, you need to open one deal after another, not forgetting to put stop – orders at the break-even level. But you have to be prepared and accept a lot of zero transactions, or even unprofitable (due to gaps in the market).
  2. Machine trade. Is it advisable to use software trading? In answering this question, traders were divided into two camps. Some traders believe that it is better not to use robotics at all. Others use software trading in some market areas and are very pleased. Apparently, you can use software trading, but with some caution. A machine has its advantages over a person: it does not need rest, leisure, lunch breaks, etc. In addition, the machine is not endowed with emotions, and there is no likelihood of a breakdown. But who is programming the machine? Human. And not the fact that he is competent in trading. As a rule, this is done by programmers who are prone to exact sciences, but this is not appreciated on the exchange. Psychology is important here. And programmers are usually bad psychologists and vice versa.


Whoever says it, but money management is one of the key elements of speculation. You can apply the best trading methodology, have an impeccable trading plan, be responsible, but if you do not follow the rules of money management, you will not see success. Novice speculators destroy their accounts and open new ones until they realize this banal truth.

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