One of the most important aspects of trading is correct money management and unfortunately it is a topic that many new traders overlook. It can be the difference between a trader who is consistently profitable and one who erodes their account.
The goal of any trader is to participate within the financial markets and make sufficient profits to attain their goals and objectives – however, their initial goal with equal importance is that of survivability. No matter how good a trading system or strategy is at producing winning trades, without the correct money management it will surely fail. As a trader it is their responsibility to trade within their limits and ensure survivability by employing the use of correct money management techniques.
Money management techniques should have a good solid foundation and contain the rules that enable a trader to participate safely within the markets. The rules are there to provide structure to the trade and negate any personal emotions that may come into play. In effect the trader should be able to trade on autopilot knowing that their emotions are not required and the strategy and money management will guide them.
