Each of the models discussed reflects the most frequent approaches of traders to money management. We will have a look at both the advantages and drawbacks of the systems. The most experienced and skillful traders sometimes mix these models, however, only in compliance with their trading strategies.
Tag: money management
Beginner traders usually consider money management to be some dull paperwork; outwitting and conquering the market for a short-term profit seems much more exciting. Short-term effects give you the feeling of a victory but are very few. Such an approach tends to end up in a failure as it is, in essence, playing with the market but not a serious systematic approach. And after the trader realizes that trading requires a strategy and a plan, they start to consider studying some money management models.
As soon as they get a little free money, beginners open another position and, when it comes to the crunch, lose all their orders and entire deposit. To avoid such situations, people created and developed some specific rules to manage their capital and risks.