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Money
Management
By Bennett McDowell
Money management in trading involves specialized techniques combined with your
own personal judgment. Failure to adhere to a sound money management program can
leave you subject to a deadly “Risk-Of-Ruin” exposure and most probable equity
bust.
With this in mind, here are a few essential money management techniques that can
make a big difference for your bottom line:
1. Always Use Stops. 2. Use A Proven And Tested Methodology For Calculating
Stops Rather Than An Arbitrary Figure. 3. Use A Proven And Tested Trading
System. 4. Pay Close Attention To Your “Trade Size” For Each Trade And Be Sure
That You Take Into Consideration The “2% Risk Rules”. 5. Never Exceed A 2% Risk
(Of Your Trading Account Size) On Any Given Trade. 6. Never Trade More Than A 2%
Risk (Of Your Trading Account Size) In Any Given Sector. 7. Never Exceed A 6%
Risk (Of Your Trading Account Size) Over-All At Any Given Time. 8. Always Trade
With “Risk Capital” (Money You Can Afford To Lose). 9. Never Trade With Borrowed
Money. 10. Use “Scaling” Out Of Positions To Boost Your Percentages. 11. In Most
Cases, Be Sure Your Trading Account Size Is Not Greater Than 10% Of Your Total
Net Worth. 12. Develop “The Trader’s Mindset.”
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