Study Guide for Come Into My Trading Room - Forex Factory

MONEY MANAGEMENT
E I G H T
The third M of successful trading, Money, is certainly the most neglected.
Beginners spend a lot of time and energy trying to learn Methods, and
more experienced traders worry about their discipline and other topics
of the Mind, but only the pros pay enough attention to Money.
A professional understands that whether he trades an Internet highflyer,
soybean futures, or IBM calls, he is ultimately trading money. Any
specific market is just a vehicle that may bring him a higher return than
a bank. This is why counting money is no less important—perhaps more
important—than counting indicator readings.
Have you noticed how, in trading, everything that can go wrong
tends to go wrong? There are legions of people making a living in the
markets, and they make money when you stumble. Every imaginable
banana peel gets thrown in your path. To protect yourself from losses,
you need to establish and religiously observe money management rules.
Money management provides a safety net on your journey to that
appealing land where you will be free because you trade for a living. If
you have a reasonably good method for analyzing the markets and finding
trades, you will succeed, if—and this is a very big if—you can protect
your capital along the way.
To underscore the extreme importance of money management, your
answers will be graded differently in this chapter. There will be no
“fairly good” rating. You must obtain an Excellent score because the
only other rating is Poor. Poor in more ways than one.
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