Money Management or Position Sizing – Part 1: WHAT IS IT?

As frequently mentioned earlier, Money Management is one of are the most important aspects of a trading system, along with positive expectancy and self management (trading psychology), which many professionals even believe that these aspects are the “holy grails” of trading. While Money Management is extremely crucial, it is important to note that having a trading system that gives you a positive expectancy should be in the top priority when you...

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Money Management / Position Sizing

Money Management is a very important component in trading. In his book, Come Into My Trading Room, Alexander Elder emphasized the importance of Money Management to be successful in trading: Every winner needs three essential components of trading: a sound individual psychology, a logical trading system and a good money management. These essentials are three legs of a stool – remove one and the stool will fall together with the person who sits on it. Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively...

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