The Successful Trader's Guide to Money Management

CHAPTER 12Questions and Answers

1. Does money management study the trades to place, and provide for the strict application of a stop‐loss and a set profit target?

   No, money management only tells you how much to invest. It doesn't tell you where and how to exit a trade. Trade management and studying trades is part of ‘risk management.’

2. But in some cases money management tells me not to open a trade. Isn't this the same as specifying entry and exit levels?

   No! If the chosen money management model advises you against opening a certain trade, it does so because it finds the risk of that trade excessive for the risk you are willing to take. In this case ‘how much’ is equal to 0.

3. The strategies in the book produce astonishing results. Can they be used?

   The strategies in the book are basic models used to show how to apply the rules of money management. They are trend‐following strategies that worked in the past and might work again in the future; however, I wouldn't recommend them to anyone as they're very basic, and there could be long periods in which they don't produce profits. It would be better to concentrates one's efforts on developing something more solid.

4. Can you really obtain these kinds of results using money management?

   Yes you can, the correct application of money management techniques produces notable results; but everything takes time, and you shouldn't expect to emulate Larry Williams and increase your capital a hundredfold in just one year. Throughout the book, medium ...