Day Trading For Dummies, 4th Edition

Chapter 21

Ten Tested Money-Management Techniques

IN THIS CHAPTER

Using simple techniques to limit losses

Determining the right size to trade

Finding statistics to plan trades

Realizing the dangers of ignoring money management

The key to success in day trading is discipline. That starts with good money management: determining how much money you will trade, when you will cut your losses, and when you will walk away with money in your pocket. If you don’t manage your money, you won’t be trading long.

Here, you get an overview of the key money-management techniques that you should consider as well as one that is a very bad idea. Some of these techniques are simple; no calculation is required, and you can use them right away. Others involve a little workout with your calculator. A few of these techniques need your performance history to work, so you can’t use them right away, but you can experiment with them as you build your trade data. (And yes, this is one of the many reasons that traders should keep records of trading activity.)

These days, many brokers include money-management ...