Trading is a completely different animal entirely. I’m not condemning any approach to the markets at all. Cycles work, astrology works, Elliott Wave works, Gann methods work, trend line breaks work, technical analysis works, fundamental analysis works, moving averages work, oscillators work, chart patterns work, etc. However, no approach, no matter how good, will work without sound money management rules because no approach is 100% infallible.
- Accuracy is not the deciding factor to consistently making money in the markets.
- Relying on the trading advice from newsletter writers and market gurus will not help you.
- Understanding Fibonacci and other magical numbers and price retracements is meaningless without money management and strict trading rules.
- Learning entry techniques without money management is about as valuable as flipping a coin. In reality, it is actually worse.
- Understanding Gann, Elliott Wave, or any other past legend may help a little, but it is not the “Holy Grail.” Gann actually tried to point out the path with his “Twenty-Four Never Failing Rules,” which are all money management rules. However, most people think he made his fortune entirely based on having amazing accuracy. I believe that he made his money by following strict rules and nothing more.
These are the exact rules that most traders completely ignore and are the main reason why 80 to 90% of them fail. They believe that if they can find a way to predict the next top or the next bottom, they will turn everything around and become successful in the markets. Achieving any degree of success in this regard will eventually lead them to failure because they are basing their entire success on being correct instead of controlling risk. Pulling off a few winning trades will reward you for the wrong reasons and conditions you to behave incorrectly in all future trades.
There are hundreds of books on trading, and all types of different approaches, systems and methods, yet they produce so few successful traders. Money management is not the main attraction to the markets and it probably never will be, but ironically, making money is. How will you ever make money in the markets without “money management” skills? Making money only requires you to protect enough of your capital so that you will always be able to have enough to continue playing the game.
If you can consistently take limited risks with high reward potential, you don’t have to be correct very often to be profitable. That’s what trading really is! Learn this fact NOW and you will find yourself well ahead of the majority of traders.