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Summary of Money Management and Trading Guidelines

The most important elements of money management and trading are the following

  • Trade in the direction of the intermediate trend
  • When there is an uptrend, buy the dips and for the downtrends sell on the bounces
  • You need to let the profits run and cut your losses short
  • Use stop losses to limit your losses
  • You need to have a plan and never trade rashly
  • Plan your work and work your plan
  • Always use money management principles
  • You need to diversify but remember that you don’t overdo it
  • Employ at least the 3 to 1 reward to risk ratio
  • When you are adding positions follow
    • Each successive layer should be smaller than before
    • Add only to winning positions
    • Never add to losing positions
    • Adjust stop loses to the breakeven point
  • Never receive a stop out; don’t throw good money after a bad trade
  • Close the losing positions before the winning ones
  • Work from the long term to the short term
  • Use intraday charts to fine tune entry or exit points
  • Master intraday trading before you try it
  • You need to learn to be comfortable as a part in the minority
  • Technical analysis is a skill that improves with experience and study. You need to be always a student and keep learning
  • Keep it simple because more complicated isn’t always better.