Money management is a critical, yet commonly overlooked topic when it comes to trading. With this guide from RJO Futures, you'll learn concepts that put risk management in an easy-to-understand format. With real-world trading examples that you can begin applying to your trading right away, you will learn about risk control, position size, stop placement, and more.
As It Relates to Trading FuturesTable of Contents
Introduction: The Basics of Money Management...................................................................................................3
Understanding Leverage............................................................................................................................................4
Constructing A Money Management Plan...............................................................................................................6
. Position Size.........................................................................................................................................................6
. Traps and Pitfalls..................................................................................................................................................6
. Overleverage..............................................................................................................................................6
. Arbitrary Goals and Rules..........................................................................................................................6
. What You Need to Know About Your Method......................................................................................................7
. Market Diversification.................................................................................................................................7
. Market Volatility...........................................................................................................................................7
. Trading Method Statistics...........................................................................................................................7
. A Word About Stops.............................................................................................................................................7
. Putting It All Together...........................................................................................................................................8
When Trading IS Like Gambling................................................................................................................................9
The Holy Grail of Trading.........................................................................................................................................11
Quiz Yourself About Money Managment................................................................................................................14
For More Information About Money Management................................................................................................16Introduction:
The Basics of Money Management
This booklet is a collection of articles on money management as it relates to constructing a
successful trading plan. Traders often overlook money management, choosing to focus
on more exciting topics of conversation, such as stochastic crossovers, convergences and
divergences, technicals versus fundamentals, and the list goes on. It is quite true that money
management in theory and practice is not an exciting subject-but it is a critical subject
when it comes to successful trading. A successful trading plan includes a sound money
management plan.
Through his unique blend of real-world experience and homespun wisdom, author and market
veteran Chad Butler will take you through concepts and examples that put money manage-
ment into a whole new light. You will gain a better understanding of risk control, position size,
stop placement, and more. We hope you will find "The Basics of Money Management"
useful for your trading.
3Understanding Leverage
hroughout my professional career, I have taught inability to understand money management as it ap-trading seminars and webinars, written newslet- plies to trading is a recipe for disaster. ters and advisories, and generally spoken to a Tlot of people about trading. The most common topics If it is the most common problem, then why don't more people want to discuss are: What indicators do I use traders focus on it?and how do I time an entry? While these are important things to consider, they are not actually the be all ... [download for more]
