Hey Everybody,
One of the most frequent things I hear on this thread is that I leave too much money on the table. The market trended all day don't you wish you would have stayed in and captured more money today. I always answer no to this question. There are several reasons for me to pick a target and stick to it. The main reason is it just makes sense to take the money and run. I have personally experienced the pain of having my trade go in my favor very fast 2 points and beyond. I rode it out. Then as fast as it went up it came back down. Now since I didn't have a stop set because I broke a major rule of smart trading I couldn't get out fast enough. What would have and should have been a sure 2 points all of a sudden I was lucky to get 1 point. That is a fact of the market. Also this is a couple of exerpts from Dr Alexander Elder on the subject of money management.
Survival First and Get Rich Slowly,
The first goal of money management is to ensure survival. You need to avoid risks that can put you out of business. The second goal is to earn a steady rate of return, and the third goal it to earn high returns â but survival comes first. Professionals tend to run as soon as they smell trouble and re-enter the market when they see fit. Amateurs hang on and hope.
An amateur trying to get rich quick is like a monkey out on a thin branch. He reaches for a ripe fruit but crashes when the branch breaks under his weight. An amateur who opens a $20,000 trading account and expects to run it into a million in two years is like a teenager who runs away to Hollywood to become a pop singer. He may succeed, but the exceptions only confirm the rule. Amateurs try to get rich quick but destroy themselves by taking wild risks. They may succeed for a while but hang themselves, given enough rope.
If you set modest goals and achieve them, you can go very far.
Maybe this will give you some insight as to why I set my money management rules as I do and do not veer away from them unless I personally see something that changes my mind. I do not listen to anybody elses ideas about this matter because I am the one responsible for my survival.
Hope this will help somebody keep from losing their bankroll one day.
4re
