Success in trading is DISCIPLINE,MONEY MANAGEMENT AND TRADING SYSTEM:x-man

Success in trading is DISCIPLINE,MONEY MANAGEMENT AND TRADING SYSTEM-IN DESCENDING ORDER OF IMPORTANCE.

If you want to give weightage to the above three then :

Discipline is 50%
Money Management is 40%
And trading system is 10%

You may not agree now but once in your trading life you will realise it.For the time being lets proceed with the above weightages.From the above weightages, Discipilne and money management is 90% factor for success.

Lets see Discpline first.

What is discipline?

Its nothing but following completely the rules which an individual trader as framed for trading.Now what are the rules of trading ? The rules of money management rules and trading system rules.

Money management (from internet)

A basic investment tenet states there is a direct relationship between risk and return. Trading is no different - the greater the account value risked on a single trade idea, the more volatile the total returns from the trading strategy will be.

A simple strategy is to never risk more than 2% of your trading account on a trade. Most professional money managers will risk a fraction of 1% on a single trade.

"There are many bold traders, but there are very few old, bold traders".

One final quote:

"Winners hold their winning trades, losers hold their losing trades"

MONEY MANAGEMENT IS VITAL TO TRADING SURVIVAL,TRADING SUCCESS,AND TRADING PROFITS.......know them and open the treasures available.Know them not ,and that will be at your peril and doom.

Basically,we use money management rules to restrict how much the market can take away from us. Certain rules that we follow with discipline.Rules that are written and implemented trade after trade,again and again.Rules that help us to stay with the trend and to let profits run as long as possible.Rules that trigger off small losses as compared to the big profits.

Like a warrior,this is the Code that a trader swears by,and adheres to,come what may.

If his stop is triggerred,a trader is out,he does not sit there reasoning that the economy is growing 15%,and the fundamentals of this company is great,and that it is expecting good earnings............If the stop is hit,that's it.He/She's out of that trade.All thought therefore goes into the trade BEFORE the trade.No more thoughts after the trade has been set in motion.

The mind is set into "NOW" mode,no more planning ,no more thinking.When the stop is hit,the trader is out,...........and that's that!

But,there is more to money management other than stops........stops is an aspect of it.But there is more.....

But before getting into it,just noticed that there always is this great amount of blabber about the number of wins a trader has had,etc etc...............So before getting into things,felt that we all should realise one thing.We are in this business to make [b]profits,we are NOT in this business to win......[/b].you can have a Batting Avg of 95% and lose out when you look at profits and losses.You can have a Batting Avg of 30% and come out with stupendous profits by the end of the month.

How is that possible?Well,presume you make an average of 200 taka per trade for 19 trades,and lose 5000 taka in the 20th trade,well,you are sitting pretty with a 95% batting avg and a loss at the end of the month.

Presuming that you have made losses in 14 trades,an average of 400 taka per trade,and we made 10,000 taka in the other 6 trades,well,we are sitting with a profit at the end of the month although we have been wrong 70% of the time.

So,it's not about about the number of wins that one makes,it's all about making profits............and that verily is the heart and core of money management!