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PureBytes Links
Trading Reference Links
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Perhaps 25% of successful trading is risk and money management. Maybe 5% to
10% are our trading strategies, methods, tactics, technical analysis, cycles
analysis, fundamental analysis, crowd psychology, intermarket analysis. The
rest is personal psychology and self discipline.
Strangely, we spend most of our efforts on the 5% to 10%.
How can a trader learn more about risk and money management?
Recommend viewing many many times, the Position Sizing video set by Dr. Van
Tharp available at his www.iitm.com website. His two books are also ok, but
this video set is outstanding, whether swing trading, intraday trading or
investing.
Dr. Tharp's books are:
- Financial Freedom Through Electronic Day-Trading
- Trade Your Way to Financial Freedom
Also worth reading are these books - some only have a chapter or so about
money and risk management:
- New Thinking in Technical Analysis by Rick Bensignor
- The Compleat Guide to Day Trading Stocks by Jake Bernstein
- The Trading Game: Playing by the Numbers to Make Millions, by Ryan Jones
- The Real Holy Grail: Money Management by Eddie Kwong
- Elements of Successful Trading by Robert Rotella
- Campaign Trading by John Sweeney
- Undergroundtrader.com Guide to Electronic Trading by Jea Yu
If you want deeper books, these are more difficult reading and contain more
about risk and money management:
- Quantitative Trading and Money Management by Fred Gehm
- Portfolio Management Formulas by Ralph Vince
- Mathematics of Money Management by Ralph Vince
- New Money Management by Ralph Vince
- Profit Strategies: Unlocking Trading Performance with Money Management by
David Stendahl
There are conflicting opinions about risk and money management methods and
details, and these topics have been a battleground for some academics.
There are no easy, simple or single answers to most questions about risk and
money management. Beware of anyone giving you simple or definitive answers,
especially without his/her knowing a lot about you and your trading.
That said, and tongue in cheek, the simplest and most accurate answer to
what to use for stop losses, trailing stops, position sizing, profit
targets, scaling in/out or not, is: "it depends".
It depends - upon your trading strategies, risk tolerance, account size,
personal psychology, even at times the markets and the nature of the symbols
that you trade. There are differences between instruments - trading shares
versus trading contracts. Etc.
Like finding your own trading strategies and methods, same kind of effort is
required for developing your own risk and money management rules.
Vince Heiker
Flower Mound, Texas
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