A trader\'s money management system

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

140 A TRADER’S MONEY MANAGEMENT SYSTEM

YOU’VE GOT TO PLAY BY THE RULES!

You’ve got to play by the rules, your rules, that is. And you get to design

your own plan and select the rules that work best for you. So roll up your

sleeves and let’s get to work.

We are going to break this down and tackle each area of the money

management puzzle one step at a time. When we’re done, you’ll have a

tailored system designed for your unique needs. It’s probably a good idea

to jot down notes as you work through this chapter so that you can edit

and refine your plan. Start by checking off the boxes next to the rules that

you feel will work best for you and your trading system.

As you go through the list of rules, remember that these rules are all

relative. Each reader will have a completely different set of circumstances,

so this list is designed to illustrate a concept. It is up to you to see how the

concept either works for you or doesn’t. This is why there is a box you can

check off for “other.” That way you can zero in on exactly what parameters

suit you.

WHEN DO YOU GO ON HOLIDAY?

There comes a time when you will decide you are not trading well and it

might not be immediately apparent as to why. For this reason, you may

want to determine rules for deciding when to take a break from your trad-

ing and go onholidayfor a bit. Here’s a checklist of triggers you could

choose tostoptrading:

Remember, these are examples only. Choose your rules based on your

personal trading results and style of trading.

In One Day


 2 losing trades in a row


 3 losing trades in a row


 $500 loss


 $1,000 loss


 Other:

In One Week


 2 losing days in a row


 3 losing days in a row


 $1,000 loss


 $2,000 loss


 Other: