Here I am going to share with you some real life experiences. The lesson here should serve as my free lesson on how to implement a sound money management principle into your trading. Whether you are an active trader, or are thinking about embarking on a trading career, having a good money
management system will help you sleep at night if nothing else.

A few years ago I flew to Texas to attend a weekend trading course with the top trader in the world (or one of the time.) His name is Kent Calhoun and he had a reputation for being able to predict the tops and the bottoms of any market with uncanny certainty. Now I know this may sound like a fairy story, but bear with me. He was a 'technical' trader meaning that he used
patterns in the market to predict what would happen next.

He believed that patterns on a trading chart would repeat themselves over time. Therefore, after seeing a particular market move on the charts he would look back at historical records to see where the market was likely to go based on the pattern in front of him. To Kent, if a market pattern followed through 95% of the time in the past then there was a 95% certyty that
it would follow through again. Now, if you think about the fundamental logic behind this reason argument, then it is actually quite solid. However, it was Kent's philosophy on money management which put him leagues ahead of his competitors.

To sum his theory up let me give you it straight. It's all about using 'stop losses'. If you are trading and do not know when to get out of the markets then you are a train crash just waiting to happen. Until I learned this from bitter experience I just assumed that this particular part of his
training could be 'side-swerved'. So, trust me when I say this. If you can follow this money management principle and you have a good trading system to work with, then you stand a pretty good chance of beating the rest of them. Here is my forex trading money management principle. Never risk more than 2% of your account balance on any one trade. That 13 word sentence could save your life, trust me. In saying that, if you have a brave heart and a big wallet then there
is a lot to be said for stocks and forex 24 hour trading.

Source by Chris Canos