What is the significance of Money Management in Intraday Trading
(Day Trading)
Day trading as a business can be very profitable. It is probably
the safest form of investing, as you are focusing on a small number of
positions, you are not holding any positions overnight and you are able to
enter and exit trades with pinpoint accuracy. However, many day traders find
themselves losing due to poor day trading money management.
How Much Should You Risk?
The size of your trading position, is in direct proportion to the
value of your portfolio. The key to day trading success is to avoid big losers.
To avoid this, you should only risk a total of 1% of your portfolio on any one
trade.The minute you see that the trade is wrong, get out with small hit.
Because in the end, the goal here is to see a small number of .25% or .5%
losses, while your winners are in the range of 1%-3%. This is how you will win
the game. Again, the 1% stop loss is for the unexpected sharp counter move, and
it is not your goal to have this stop hit. You should know well before your
stop is hit if you are in a bad trade.
Futures & Loans:
Always trade in Cash, never touch Stock Futuores or Stock Options
just because leverage is high or margin is low. You should master cash trading
first before taking the next step.
Don't every use the emergency, investment or retirement funds for
trading. Also, don't ever take loan or borrow money for trading. Traders that
operate with a positive cash flow and utilize day trading money management
rules, have a much higher success rate than traders that start out in the red.
Trade Log:
Keep log of all your trades and review them periodically, which
will help you avoid repeating bad trades and successfully repeat winning
trades. Use our "Trading Management Tracker" for this purpose.
Positional Sizing:
This is the most important aspect when it comes to trading. We
have written a separate article on this. Go through it here - Importance of
Positional Sizing - https://marketsecretsrevealedforyou.blogspot.com//2018/01/positional-size-calculator.html
Take Away:
- Money Management is considered the most important aspect when day trading.
- If you do not implement a money management technique when trading, you will inevitably lose your money.
- Your 1% stop loss is not meant to be hit! It is there to protect you from huge price moves.
- Attempt to close all your losing trades before the stop loss is triggered if anything feels out of place.
Please download the Trading Management Tracker using the below link:
https://drive.google.com/open?id=1bsYOVpUxlIjN9W07-aU0chjfAGncfdx1
Need help in building an End-to-End Trading set-up? Then, Contact
us https://t.me/MarketSecretsTeam
through telegram or Email us at marketsecretsrevealed@gmail.com
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