This is because money management is barely an afterthought for so many traders.
Many people avoid the topics of risk and money management because they realize that by controlling risk they will not become rich overnight. But the fact is that they will not become rich at all if they don't learn how to manage money.
One of the pillars of the industry is the search for the holy grail and indeed the industry is infatuated with trading systems. Many traders, specially those who go through that initial phase of frustrating losses, look for mechanized methods of trading that just generate entry and exit signals to follow, no questions asked. However, they rarely search for a a system of money management able to generate "signals" that dictate how to size and managepositions. But the reality is that these techniques exist and, although being mechanical, they are much more effective than mechanical buy and sell signal generators.
Have you ever stopped to ask yourself that question: if money is to be made through trading systems, why the big majority of individual traders end up break-even or losing money? This is because money management is barely an afterthought for so many traders.
While most novice traders think there is some kind of order to the market that only few people know, and tend to focus on finding an inefficiency or an edge in the markets, the greatest opportunity for profit is often found in amoney management method. The key to wealth accumulation in the markets does not come from knowing where you get in and out. Neither it comes from being able to accurately forecast market direction.
Successful traders are those who realize that money management has to be part of the trading plan. Sadly, many people never even come to this realization. Read More
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Editors’ Picks
EUR/USD accelerates losses, focus is on 1.1800
EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.
GBP/USD turns negative near 1.3540
GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.
USD/JPY holds gains near 154.00 ahead of the Fed’s minutes
USD/JPY retraces Tuesday's losses and returns near weekly highs in the area of 154.00. The US Dollar trims losses in quiet markets with all eyes on the Fed's minutes. Weak Japanese GDP data resurfaced concerns about Japan's fiscal stability and halted JPY's recovery.
Editors’ Picks
EUR/USD accelerates losses, focus is on 1.1800
EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.
GBP/USD turns negative near 1.3540
GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.
Gold battle to regain $5,000 continues
Gold is back on the front foot on Wednesday, shaking off part of the early week softness and challenging two-day highs just above the key $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.
Fed Minutes to shed light on January hold decision amid hawkish rate outlook
The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.
Mixed UK inflation data no gamechanger for the Bank of England
Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.
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