What is a good cash management system? Think of a rotating carburetor to get two things: air flow and fuel mixture. Thus, a loud cash management system ensures the flow of money and the balance of maximum capital preservation against the power of profit!
When trading stocks or options, you do not want to earn money as a primary priority, but instead to reserve your capital, you need to bring a higher percentage of% of lost% to return to the same level. we must always have another day in the fight against war. You are not a good trader if you can not stay long enough in the game.
The next question is what does it mean to stay in the game? Ask the following:
First, it's important to quantify the worst scenario and ask whether we can use this risk
Secondly, if it happens in the worst case, it cancels their capital or severely restricts its trading ability? If the answer is yes, then the number of shares or option links should be reduced as long as the risk can be exercised.
Third, it should be able to distinguish between acceptable risk and unacceptable and ultimately calculate the expected profit of trade against the risk and ask whether trade is worthwhile.
The money management command I strictly insist on will not invest more than 5% of money into a single trade. The beauty of the 5% rule is that it allows me to increase the size of each trade when I do well and force me to reduce when I go badly. Let's say you have $ 10,000 in investment, so there are 20 games. When the stock has an upward momentum, you have to ride as long as possible, and you must immediately win the profit and immediately reduce the loss as soon as you realize you have a downward momentum. So you are likely to get a lot of profits for some good trading is good enough to keep up with the right risk management in the net profitable situation for some bad deals. Professionals keep up to this 5% rule, so why not do the same?
Source by sbobet