Keys to Personal Money Management An Introduction
By Ultimate Trading
Six Rules For Successful Personal Money Management
Everyone knows that markets are risky, and that there is no crystal
ball that will let you predict a markets movements perfectly,
personal money management 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.
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, a trader can easily loose their capital to a market
Personal money management rules are the way to protect your capital
and your profits. Even the most unexpected downturns in the market
can be dealt with by developing your personal money management rules
carefully, and paying close attention to these six personal money
management keys. These keys 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
The first personal money management key 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 personal money management key 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 personal money management key 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 personal money management key that you must remember 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 key way 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 keys consistently and
incorporated them into your personal money management plan, you will
drastically improve your trading performance. But remember, your
personal money management plan 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 money management plan, you will make mistakes. With a
plan, you will be able to act calmly and rationally, and make many
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Personal Money Management