Money Management and Discipline Matters In Trading

By | October 3, 2018

It is a common assumption that most traders lose money, while winning traders are few and far between. But what sets these winners apart from the masses? It isn’t the ability to pick precision entries, but rather an understanding of money management.What causes the 90% to end up unprofitable in the long run is Trading errors. Errors caused by fear, ego, greed, and a lack of discipline to create a plan or to follow it if they do.

Avoid Below Trading Error

  • Avoid Being an Egoistic: Never Ever hold on to preconceived beliefs about the direction of the market with no planned signal that will show them when you are wrong. Monday We went short once Nifty broke 10850 but we got Stopped out and accepted the Loss.
  • Control Your Greed :Never Ever make huge position size that will cause a huge loss if wrong or a huge win if right in a Single Trade. This is greed that only sees the upside and not the downside.
  • Trading with no plan is due to laziness and possibly arrogance.
  • Abandoning a plan is due to fear of a draw down or a lack of discipline.
  • Being wrong and staying wrong about a trade is due to stubbornness and denial.
  • Asking others for opinions about trades shows our own lack of discipline to have a plan, a system, and to have done our own homework.

Practicing Discipline

Money management may be the most overlooked area of trading.

As the Old Adage Goes: Strategies do not make money,What makes Money is the Money Management/Risk Management Discipline of the Traders

Strategies evolved over time, it is not the strategy that makes money; it is everything you do around it that does.you can have the best strategy in the world, but still blow out with a bad money management strategy.

Even a trading plan as simple as a moving average crossover system can be a net winner when money management is applied. This discussion of money management will build a foundation of concepts that can be applied to any trading plan.

A money management plan will help you in another key area – discipline,Prevent the balance of emotions, fear and greed,

As a trader, your money management strategy is the one variable that will give you the biggest edge in trading .

Answer Below 2 Questions When Ever You Place the trade next time,

  • How much money should I risk on this trade?
  • AM I comfortable in taking the loss and will I be in my senses If I take the loss.

 


Make sure the markets that you are trading in fit with your account size and risk tolerance. Nifty has been highly volatile, If you cannot handle reduce your trade size so that loss are in control.

 

One thought on “Money Management and Discipline Matters In Trading

  1. Sudakaran Sokkaingam

    As usual nice article and timely article.

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