Money management is a critical point
that shows difference between winners and losers. It was proved that
if 100 traders start trading using a system with 60% winning odds,
only 5 traders will be in profit at the end of the year. In spite of
the 60% winning odds 95% of traders will lose because of their poor
money management. Money management is the most significant part of any
trading system. Most of traders don't understand how important it is.
There are some common mistakes I’ve seen traders make
in the area of money management. First, let’s understand what money
management is all about. Money management overlaps with risk, trade,
business, and personal management, yet it has many aspects that make
it unique, distinctly different from all of the other areas of
management. In this chapter we want to examine some areas of money
management that seem to involve mental quirks leading to costly
mistakes.
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