A trader\'s money management system

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c12 JWBK182-McDowell April 25, 2008 16:15 Printer: Yet to come

114 A TRADER’S MONEY MANAGEMENT SYSTEM

attaining The Trader’s Mindset easier. The cycles become second nature.

Of course, with experience the management of the cycles gets more effi-

cient. Let’s look over the numbers:

Exceptional win ratio of 80 percent; this is the direction we want to

continue in. The annual win ratio is 39 percent wins, so this week

my student doubled the number of wins, and it certainly boosted the

bottom line.


Commission ratio was outstanding, with only 1 percent of the profit

going to pay the broker. This is compared to the annual ratio of 25

percent being paid in commissions. Certainly, there are added benefits

to raising your win ratio, and that is reduced commission expenses.


The notes at the bottom of my student’s ledger read: “It was a bet-

ter week. I was able to record some good gain. Dow dropped a huge

amount, down 586 points. Nasdaq lost 136 points, down 5 percent. The

Eminis S&P 500 that I traded dropped 85 points, down 5.5 percent. All

of this happened a week after the market posted record highs (DOW

14,000). Indeed it was a very big correction this week. I am sure I could

have done better. For instance on 7/26/07 if I would have chosen the 3-

minute time frame, I could have made a very nice profit instead of a

small loss. But, how to choose the time frame, that is the question!”


There is a lot to be learned from reviewing the notes you’ll be putting

on your ledgers. For example, here this trader recognizes that select-

ing the right time frame has a great impact on profitability. Therefore,

on future trades he’ll be more aware of his techniques and how to

implement them.

DAILY TRADE LEDGER EXAMPLE

The daily ledger is really just a compilation of all of your individual trade

posting cards for the day. The daily ledger lists all the filled orders. Your

most meaningful notes will be found on each individual posting card (see

Figure 12.6).

DAILY WORKSHEET EXAMPLE

This form is used in conjunction with the daily ledger so that you can list

all your placed orders. Only your filled orders will go onto a trade posting

card or onto your final daily trade ledger (see Figure 12.7).