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c14 JWBK182-McDowell April 25, 2008 16:23 Printer: Yet to come

CHAPTER 14

Risk

Management

Rules to Choose

From

N

ow you’re ready to design a custom money management system that

suits your needs. When going through the following sets of rules,

think about what your risk profile and discipline profile look like

on paper. If you haven’t yet completed those profiles, quickly go back to

Chapter 13 and fill out the questions. Also, go to Chapter 3 to identify your

strengths and weaknesses to see where you can address these personal

attributes when designing your money management plan.

For example, if your risk profile determined that you have a score of

30, you may be able to “push the envelope” while designing your rules be-

low and maybe increase the percentage of risk you take on each trade.

However, if you have a score of 90, you may want to try to reduce the risk

you take on each trade, which may improve your bottom line.

Regarding discipline, if you have a score of 30, you are highly disci-

plined. You’ll probably have no difficulty following this plan once you com-

plete it. For scores of 70 to 90, you may need to work a little on actually fin-

ishing the plan and then sticking to it. Visualize the benefits of completing

this plan and profiting from the use of it, and then make the inner commit-

ment to use it.

When you identify your current strengths and weaknesses, in Chapter

3, see how to play up your strengths and play down your weaknesses in

your money management plan. All in all, knowing more about yourself will

help you design a better plan that will generate greater profits.

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