We could investigate many types of moneymanagement but I feel this will be enough for traders to cope with and implement.As more examples unfold particularly in realtime--- I will post them up.
Before I move on to the next topic just some more thoughts on Money Management to ponder.
Its been my experience that most new traders do one or both of the following.
---to many positions open at once and/or always in a position.
Standing aside from the market is a position.
(2) Buy to larger parcels
------Here is a test if losing (on stop ALL) of your current positions would cause you financial grief----then chances are your positions are too large for your personal comfort.
This can cause you NOT to take a stop when you have planned to------
"I'm not going to lose $xxxx,It will come back/worse "Ill average down".
Trading becomes enjoyable when your trading within your comfort zone
Below is a table showing the exponential rise of one of the portfolios trading Tech Trader.I enclose it to illustrate a number of things.
(1) The natuaral compounding of position sizing when your trading plan becomes profitable
As you take profits and your working capital grows so too does your position size-----even maintaining the SAME rate of return ensures ever increasing working capital---with no input from your own wealth.
(2) The natural increase in the leverage of your shares as they become more expensive and your still in them.
This only occures when you hold for a very long time--6-24 mths.
As an example-----I traded UTB at $3.67 and bought 5000.Initially a 10% move on my investment could take a few weeks---as the stock rose to $8 and more this could occur in a week or less as it did with TOL QBE and ALL.
(3) The natural increase in the return on initial investment as your portfolio becomes more profitable.
Although I trade Margin which gives me around 2x leverage my initial capital began to double quicker as profit kept on compounding.As you can see the initial capital was $90K on Margin $30K down.Doubling my initial $30K came at $120K---9/10 mths another $30K in 12 mths now its around 5mths.for 30K lifts.(Well it was until just reciently)
As you can see the rise becomes wonderfully steeper.