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Darrell Zang wrote:
"From all I read, it's said that scrupulous money management is absolutley
necessary to be a successful trader. Things like, never trade with out
protection stops, etc. It is also said that you shouldn't risk more than 5%
of your portfolio to make any trade.
HOWEVER, when I try to follow this advice and place my stops within 5%, some
jerk on the floor goes after my trade and stops me out!! I've done a trade
at 2:00 and been stopped out at 2:01. That hurts!!
I've tried on close stops, but that doesn't offer much protection if your
moved against strongly.
My, question.....How does one keep in the market and still practice money
management?
How to keep from being stopped out???"
Money management is a combination of stops and the amount of capital
at risk. For example if your trading account was $30,000 you could trade
with 10% ($3000) and use a 50% stop to produce the desired 5%. As you have
found out if you risk all your capital and use a tight 5% stop, you get
forced out of the trade very quickley (the guy on the floor is not a jerk,
just someone who understands trading better). If on the other hand, if you
only risk 5% of your capital ($1500) without a stop, you would not have a
large enough position to be profitable. You can adjust the numbers based on
the size of your trading account, the volitility of the market you trade and
your tollerance for risk, but remember "truth lies in compromize".
Good luck and good trading,
Ray Raffurty
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