A trader\'s money management system

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

Risk Management Rules to Choose From 141

In One Month


 10% equity loss in your trading account


 Losing set of 25 trades (where after completing 25 consecutive trades

you post a dollar loss for that period in your trading account)


 Other:

If you are experiencing a losing set of 25 trades (where after complet-

ing 25 consecutive trades you post a dollar loss for that period) or if you

have a drawdown of greater than 15 percent in your account, which is un-

usual for you, it is important to stop trading. This is more than a holiday,

and you will need to paper trade to find out what is the issue.

Is your psychology off? Are you not following your trading system

rules? Have market conditions changed dramatically and your system is

not adapting? Whatever it is, you need to get to the bottom of it and pre-

serve your capital.

WHEN DO YOU TAKE THE MONEY

AND RUN?

For some traders, it is best to take profit off the table when they reach a

profit target. On occasion, traders will feel almost out of control when they

have a large profit at stake. There can be a certain amount of anxiety with

success, and if you feel that you have a tendency toself-sabotageyou may

want to create a holiday strategy for when you are doing well. Here are

some ideas:

In One Day


 $500 profit


 $1,000 profit


 $2,000


 Other:

In One Week


 $1,000 profit


 $2,000 profit


 $5,000 profit


 Other:

With these holiday strategies, as you become more comfortable with a

certain profit level, be sure to up the ante and increase your profit targets.

Push yourself to grow and stretch your comfort zone.