One of the biggest problems daytraders face is how to manage their money. Most daytraders manage their stock or emini futures positions by the seat of their pants, that is, they do not have a strategy or a plan. This usually increases their risk and can lead to losses.
So what is a trader to do? The answer is simple. YOU MUST HAVE A SOLID AND DISCIPLINED MONEY MANAGEMENT STRATEGY to trade successfully. Many trading system vendors offer buy and sell signals, but the problem is that they do not offer a money management system. They freely sell their signals, but they will not tell a trader how many contracts or the number of shares to put on for the next trade. How can a trader succeed with a service like that? They may put on a large trade just as they get a bad signal. Then, in order to make back their money, they increase their position size on the next trade and get burned again on the next signal. This is no way to daytrade and is surely one of the major reasons why traders fail.
No matter how good a system or a model is, traders inevitably fail because of the poor money management they apply to their trades. Here is an example. If you should get a streak of winners, does your money management strategy allow you to maximize your profits? How about the reverse idea…when you get a streak of losers, does your money management plan become more defensive and conservative, to minimize your losses? If you are not maximizing profits and minimizing losses you will fail. It’s as simple as that. It is easy to trade buy and sell signals, but the difficult part is what position size you should have on for the next trade.
Disciplined money management is essential for successful daytrading. I cannot stress this enough. All successful traders have a money management plan and you should too. We help traders take the guesswork out of position sizing. We offer a complete solution to trading. By using our disciplined money management program we will help you maximize your profits when things are going well and minimize your losses when things do not go as well.