How to Manage Your Money in Trading

📑 Table of Contents

1. Introduction
2. Step 1: The 1-5% Rule
3. Step 2: Set Stop-Loss Limits
4. Step 3: Avoid Martingale
5. Step 4: Compounding
6. ❓ FAQ

Introduction

Professional traders don't have a crystal ball. They have exceptional Money Management. This guide will show you how to protect your capital.

Step 1: The 1-5% Rule

Never risk more than a small percentage of your total account balance on a single trade.

• Recommended: 1% to 2%.
• Maximum: 5%.
• Example: If you have $1000, your trade size should be $10 to $20.

Step 2: Set Stop-Loss Limits

Determine your daily loss limit.

• "If I lose 10% of my balance today, I stop trading."
• This prevents emotional trading ("revenge trading") that leads to blowing the entire account.

Step 3: Avoid Martingale

Martingale is increasing your bet after a loss to recover it (e.g., $10 loss -> bet $20 -> bet $40).

• Danger: A losing streak of 5-6 trades can wipe out your entire account.
• Better Approach: Keep your trade size consistent.

Step 4: Compounding

Reinvest your profits to grow your account exponentially.

• As your balance grows, your 1-2% trade size naturally becomes larger in dollar terms.

❓ FAQ