The importance of money management in trading

There are two key aspects in trading, the offensive acpect corresponding to a trading system with a positive expectation and the defensive aspect that corresponds to money management.

This is essential because it will be the "protector" of the trader's account. Indeed, it is increasingly hard to find balance in his account when he sinks into a downward spiral.

Consider two examples: Your account has a loss of 10%, 11% have to win to regain the starting level of your account.
Now, suppose that your account incur a 50% drop, it is a profit of 100% to find your starting level.

Through these examples, you can see that it is essential to protect their account to a tolerable level of loss (we can say around 15-20% maximum) as beyond, it becomes very hard to recover its losses.

Specifically, it is essential that you limit your losses on each position for every fat loss started as a small loss that magnifies the son of the time.

To find out what risk you can trade, you need to know the statistics of your trading system to adjust the risk that it is possible to take every trade. A system that generates a lot of consecutive losses must necessarily be very low risk on each trade. In contrast, a system without a lot of consecutive losses can take a greater risk by position.

Initially if you fail to decline, for precaution, I recommend you take only a very low risk (in the order of fractions of a percent). Once you master your system, then you can increase the risk position taken by knowingly.