Personal Money Management Rules An Introduction
By Ultimate Trading
Six Money Management Rules For Success
Everyone knows that markets are risky, and that there is no crystal
ball that will let you predict a markets movements perfectly,
thats where personal
rules comes in. Many traders will be looking for opportunities
to make a profit, but good traders will also realize that sometime,
somewhere, a market correction is going to occur. Since they dont
want to endanger their capital, they will be prepared for this
correction and use personal money management rules.
They may even be able to profit from it, if they have good systems
in place. Without these kinds of systems, and without personal money
management rules, a trader can easily loose their capital to a
Personal money management rules are the way to protect your capital
and your profits. Developing your personal money management rules
carefully, and paying close attention to these six personal money
management rules can deal with even the most unexpected downturns in
the market. These money management rules are important issues you
must consider if you want to manage your trades safely and
effectively: Ill introduce the concepts now and go into them in
more detail in the following articles.
The first of my personal money management rules is to lock in your
profits. One of the most common and frustrating mistakes that
traders make is failing to safeguard their profits. Your trade may
be showing a nice profit, but it's only virtual money until you do
something to ensure that it's yours to keep.
The second of my personal money management rules is to take small
losses and make big gains. It might seem self-evident, but many
traders dont like to take small losses, believing mistakenly that
they will recoup their losses eventually. But if you arent willing
take small losses, youll eventually lose money. Keeping losses
small keeps your capital intact so that when a trade does become
profitable, you can make big gains.
The next of my personal money management rules is to use margin with
caution. Margin is a powerful tool that can really increase your
profit, if it is used correctly. However, the fact that margin lets
you make much more profit on successful trades also means you can
lose much more on unsuccessful trades.
Another of my personal money management rules that you must remember
is to go to cash every time the market nears its top. When the
market is about to turn, cash is the safest alternative. This will
allow you to stay away from market volatility that makes it
difficult to trade and can potentially devastate your accounts.
Another of my money management rules you should follow to protect
you accounts is to diversify your portfolio by finding trades with
different risk levels in different sectors. Then, if one sector
experiences a sudden downturn, only a portion of your account will
be affected. Along with diversifying your portfolio, hedge your
risk. Hedging is a form of insurance, so it will cost you a bit by
decreasing the profits you make on a play. But there are times when
insurance is well worth the cost
If you use these six personal money management rules consistently
and incorporated them into your personal money management plan, you
will drastically improve your trading performance. But remember,
your personal money management rules should be in place before you
ever buy the stock. After you're in the position, it's too easy to
get panicked by market actions or carried away by high expectations.
If you have no personal
rules, you will make mistakes. With a plan, you will be able to
act calmly and rationally, and make many successful trades.
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Money Management Rules