Trader's Money Management System: How to Ensure Profit and Avoid the Risk of Ruin

Overview

Risk control tends to be the last thing that most traders focus on,perhaps because of the popular belief that it's their tradingstrategy that will generate great fortunes. But ultimately, astrategy alone won't create riches. A trader or investor needs todevelop discipline, a strong financial psychology, and a soundmoney management system to maximize profits and keep them out offinancial danger. In A Trader's Money Management System,veteran trader Bennett McDowell offers readers an expert guide tothe most ...

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Overview

Risk control tends to be the last thing that most traders focus on,perhaps because of the popular belief that it's their tradingstrategy that will generate great fortunes. But ultimately, astrategy alone won't create riches. A trader or investor needs todevelop discipline, a strong financial psychology, and a soundmoney management system to maximize profits and keep them out offinancial danger. In A Trader's Money Management System,veteran trader Bennett McDowell offers readers an expert guide tothe most important elements of money management in trading.

McDowell shares his personal money management system, with theultimate goal of helping you design your own system, customized tofit your risk tolerance, your experience level, and financialneeds. He identifies the six types of risk to consider every timeyou make a trade—trade risk, market risk, margin risk,liquidity risk, overnight risk, and volatility risk—coveringeach in detail.

In easy-to-understand terms, the author then breaks down hissystem into five key elements. He first explains the psychologyof risk control, telling what issues to look for and how toaddress them in order to more effectively implement your moneymanagement system. McDowell then details a variety of stop-lossapproaches and gives you tips on how to make sure you adhere tothem when they're hit. He follows with a discussion of tradesize, showing how to determine how large or small your tradesize should be so that you are not overextending your risk.McDowell then covers the crucial element of record keeping,and explains how it pays significant dividends. Finally, he showshow to design a realistic personal plan—one that youwill continue to use and profit from.

This book also equips readers with two valuable tools: Aone-month free trial of Trade Size Calculator software and TheTrader's Assistant recordkeeping materials. The trial Trade SizeCalculator software is downloadable at www.traderscoach.com (seeAppendix A for details), and The Trader's Assistant recordkeepingmaterials can be photocopied directly from the book. These twotools complement the text and together provide a complete packagethat will deliver better results to your bottom line.

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Product Details

  • ISBN-13: 9780470187715
  • Publisher: Wiley
  • Publication date: 7/8/2008
  • Series: Wiley Trading Series, #335
  • Edition number: 1
  • Pages: 210
  • Product dimensions: 6.00 (w) x 9.10 (h) x 0.80 (d)

Meet the Author

Bennett A. McDowell is the founder of TradersCoach.com®and an expert in technical analysis and complex trading platforms.Earlier in his career as a financial advisor, McDowell used his ownproprietary trading system to serve a community of high-net-worthclients. This system is now known as Applied Reality Trading®,or ART®, and is used by traders around the world in over fortycountries. McDowell lectures nationally and writes articles formany leading trading publications, including Technical Analysisof Stocks & Commodities magazine. He is a recognized leaderin trading education and is honored to be included as a member ofthe eSignal “Trading with the Masters” team. McDowellis also the author of The ART® of Trading, which ispublished by Wiley.

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Table of Contents

Foreword.

Preface.

Acknowledgments.

Disclaimer.

Introduction. This Is My Money Management System.

Part One. Psychology of Risk Control.

Chapter 1. It Just Ain't Sexy!

Chapter 2. Confidence In Your Plan.

Chapter 3. Yin & Yang.

Chapter 4. Risk Psychology and The Trader's Mindset.

Part Two. Stop-Loss Exits.

Chapter 5. Not Every Trade Will Be A Winner.

Chapter 6. Entry Rules and Your Trading System.

Chapter 7. Stop-Loss Exit Rules.

Chapter 8. Scaling Out and Scaling In.

Part Three. Trade Size Does Matter.

Chapter 9. Using Risk-of-Ruin Tables and the Optimal fFormula.

Chapter 10. Using the Two Percent Risk Formula and Proper TradeSize Formula.

Part Four. Record Keeping And Profit/LossAnalysis.

Chapter 11. Tracking Profit and Loss Results and MoreFormulas for Success.

Chapter 12. Using Trade Posting Cards and Ledgers.

Part Five. Design Your Own Plan.

Chapter 13. Know Thyself—Your Risk Profile and DisciplineProfile.

Chapter 14. Risk Management Rules to Choose From.

Epilogue.

Appendix A. Getting Started with Your Trade Size CalculatorSoftware.

Appendix B. The Trader's Assistant Record Keeping System.

Appendix C. The Art Of Paper Trading.

Appendix D. Resources.

Glossary.

About the Author.

Index.

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