[mandiuang]

Originally Posted by Soultrader »

Thanks for sharing the resources torero. I agree chart reading or understanding price action takes time. But this should be considered a mandatory skill to learn before anybody places a single trade.

mandiuang: Market knowledge, money management, trading strategy, and trader psychology are the important elements of trading. Good luck

thank you very much for all the replies, it help me to have a better understanding of the market. what is money management, and where can i learn about it? is it has something to do with our trading stop loss or target profit?

[torero]

Two books I learned money management is Elder's "Trading for a living" and Van Tharp's "Trade your way to financial freedom". There are chapters that explain about money management but the summary is this: only risk the maximum of 2% of your account on each trade. Say, you have $10,000. Your stop loss for next trade is $200 max. Then you're down to 9000, now your stop loss is now $180. This method also imposes position sizing limit. Over time, if your account decreases the risk is reduced as well. Theoretically you can trade into infinity but in real life this is not possible. But the upside you get is this: you spread your bets (number of trades) out longer. This will increase your chance of survival (longer you stay in the game, the higher your chance of making it). 2nd is discipline. As much as the word sound, it's hard than anyone think. Even if you lose, discipline should be your priority. If you enforce it religiously you're half-way there. Keep in mind that this comes with a positive expectancy (this is explained in details in Van Tharp's book as well), probabilities of making profits over time in your strategy/methods.

I'm sure there are others here have different approach to money management but I use this one. The important thing is find money management that fit your personality (your maximum threshold before you get a nervous breakdown). This means how much money can you tolerate losing on each trade without losing your cool and objectivity? Or how much maximum drawdown (consecutive losses) can you handle before you lose complete control. If you can answer this question, it's easier to find your style of money management.

I daytrade because I can't stay the entire session (6.5 hrs is alot of hours of constant concentration for me). Also because I can't stand losing a large amount because of overnight surprises even if there are more upside is greater than downside. It's a trade-off I have to live with to save my sanity.