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A Trader's Money Management System: How to Ensure Profit and Avoid the Risk of Ruin

ISBN: 978-0-470-42859-7
210 pages
July 2008
A Trader

Description

Money management may very well be the most important piece of the trading puzzle. In A Trader's Money Management System, expert Bennett McDowell provides time-tested techniques that can turn a losing trader into a winning one?and take the winning trader to an entirely new level. In revealing his personal approach to staying out of trouble in the financial markets and maximizing profits, he offers comprehensive insights into:
  • The psychology of risk control as well as the finer aspects of setting stop-loss exits
  • The value of managing trade size and consistent record keeping
  • The process of putting together your own personal money management system

Unlike other books that focus on the complex mathematical theories behind money management, this book presents its system in straightforward, easy-to-understand terms that will allow you to quickly see how these concepts work and immediately benefit from the value of effectively managing risk.

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Table of Contents

Foreword vii

Preface ix

Acknowledgments xi

Diclaimer xiii

INTRODUCTION This is My Money Management System 1

PART ONE Psychology of Risk Control 7

CHAPTER 1 It Just Ain’t Sexy! 9

CHAPTER 2 Confidence in Your Plan 15

CHAPTER 3 Yin and Yang 23

CHAPTER 4 Risk Psychology and The Trader’s Mindset 31

PART TWO Stop-Loss Exits 37

CHAPTER 5 Not Every Trade Will be a Winner 39

CHAPTER 6 Entry Rules and Your Trading System 45

CHAPTER 7 Stop-Loss Exit Rules 55

CHAPTER 8 Scaling Out and Scaling In 65

PART THREE Trade Size Does Matter 73

CHAPTER 9 Using Risk-of-Ruin Tables and the Optimal f Formula 75

CHAPTER 10 Using the Two Percent Risk Formula and Proper Trade Size Formula 83

PART FOUR Record Keeping and Profit/Loss Analysis 89

CHAPTER 11 Tracking Profit and Loss Results and More Formulas for Success 91

CHAPTER 12 Using Trade Posting Cards and Ledgers 99

PART FIVE Design Your Own Plan 131

CHAPTER 13 Know Thyself—Your Risk Profile and Discipline Profile 133

CHAPTER 14 Risk Management Rules to Choose From 139

Epilogue 149

APPENDIX A Getting Started with Your Trade Size Calculator Software 151

APPENDIX B The Trader’s Assistant Record Keeping System 153

APPENDIX C The Art of Paper Trading 167

APPENDIX D Resources 173

Glossary 179

About the Author 203

Index 205

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Author Information

BENNETT A. MCDOWELL is the founder of TradersCoach.com® and an expert in technical analysis and complex trading platforms. Earlier in his career as a financial advisor, McDowell used his own proprietary trading system to serve a community of high-net-worth clients. This system is now known as Applied Reality Trading®, or ART®, and is used by traders around the world in over forty countries. McDowell lectures nationally and writes articles for many leading trading publications, including Technical Analysis of Stocks & Commodities magazine. He is a recognized leader in trading education and is honored to be included as a member of the eSignal "Trading with the Masters" team. McDowell is also author of The ART® of Trading, which is published by Wiley.

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