Is Money Management the "Holy Grail"?

OP

Apologies for nysestocks and myself getting off track from your original question but he seems to want to traverse this seemingly endless, and useless path with me


Rabbitone

Thank You Sir for the very kind words



nysestocks

Let me see if I can summarize our last few posts and put an end to your amusing diatribe



I said positive expectancy and money management might be what the OP was searching for.


nysestocks – you ultimately agreed with me by agreeing with hadTough life, and adding “MM is of no use unless you can make money”

Which by the way is the OP’s original premise for starting this thread, - so we should be finished


But yet you continue to harangue me – Why

All I can figure is you either

A.) Want to convince me of something – To which I would respond it ain’t going to happen and you should already know that based on our previous encounter in another post

B.) You want to discredit my opinions – To which I would respond everyone here is more than capable of making up their own minds about that which I post – and if they so choose can place me on ignore anytime they like


To add

You also stated any person with 1/2 a brain can make money trading

Again who exactly are you trying to alienate

A.) Me and all the other folks making money trading (evidently by your account with only 1/2 our brain)

B.) The folks trying to become successful traders who, (again by you own admission), evidently can’t attain the 1/2 a brain level?


You also have a tendency to talk down to people – and in circles – as you’re doing it – Why

NOTE: The ‘why” is rhetorical as I do not want, nor care to know – really I don’t so stow away your ego Sir – and may I suggest the same place I told you before – in the other post – that would do nicely


Early on in my trading career I met people just like you – idiots who liked to make folks feel inferior, or would mislead and misdirect folks trying to learn – just so they could confuse / take advantage of / and/or profit from the them...

I term those idiots charlatans

You see once I was one of those newbie’s trying to learn, and being made to feel like I wasn’t smart enough to understand – like it was all my fault I did not get it. When all I really needed was someone to explain it in plain / understandable terms – no hocus pocus required


However while suffering through all the BS I made a promise to myself – a promise that if I ever got into a position where I could “Pay it Forward” I would without hesitation or reservation, or expectation of anything in return

Well here I am – and I am more than happy to go down any path you like… but be forewarned I might collect up you “holy than thou crap” and shove it right back at you – in spades

So as you and I go forward you may be well served to think of me as a Redneck with Attitude – Boggles the mind – huh


To conclude my diminutive minded friend

If it makes you feel better you may call me an idiot, dimwitted, 1/2 witted, 1/2 brained, – or any other term you like – Redneck… My teenage sons do it all the time – I chuckle at their antics, and I think I will somehow manage to survive your tripe


Otherwise I would suggest you post your opinion regarding the OP’s topic and be done with all this nonsensical debating



Aside (if someone can tell me how to attach a .gif document I plan to post a shot of my trading platform layout on a separate post) along with some “Food for Thought” notes

I’m just not totally computer savvy enough regarding attaching documents – but hey what ya expect for a Redneck


As always I hope I have not offended anyone – if so I sincerely apologize to you


Take Care All
Redneck

 

lol every posit i read i see you to arguing

 

OP started this thread 10-04-01.

For all we know, he blew-up and is now selling A-1 steak sauce in India.

 

That's entirely too funny
(sometimes I still miss the trees for the forest)



NTW31

You're right - No excuses - I've been acting like an adolescent at recess time - it stops now

Take Care All
Redneck

 

What on earth do you mean by "money management?"

Do you mean appropriate position sizing?

Or appropriate risk:reward ratio/stop size?

Or taking regular withdrawals from your trading account?

Or....?

 

i break it up into two money management and Trade management... i have them seperated i dunno i guess for organization purposes lol..

MM
i consider stuff like position sizing...
withdrawals/deposits
account size...
etc.

Trade management
i consider risk:reward crap
tactics
etc.

 

Money management is not new it has been around for generations of other businesses. A few years back traders borrowed the term “Money Management” from business management along with many other concepts of the business plan (this can be verified by Googling the words “small business money management” and view the 36,000,000 listings).

When I ran a small sideline computer business in the 1980’s (which later became a computer store) I had my first course in “Money Management.” The money management concepts for trading are similar to what I learned in small business. Here are some of small business rules I copied from my original course in small business management:

“Be aware of the movement of cash in and out of your business – called cash flow. Cash is money in the bank, not inventory, accounts receivable or property. It is what you need to pay salaries, suppliers, utilities, creditors, rent, and so on.”

“Watch the cash flow carefully. Positive cash flow – more coming in than is going out – is a signifier of financial health. Negative cash flow – more going out than is coming in – is an indicator that your company may be in trouble. Being aware of the influx and outgo of money will help you know if too much of your company’s assets are tied up in inventory, if you need to collect what is owed to you, or if there simply isn’t enough cash coming into the business.”

Now apply these same old business rules to trading. The first objective then is to have a continuous positive cash flow. During any physical period of your (trading) business you do not want one or more large business transactions to create a big negative cash flow (drawdown) that may threaten to shut down your businesses.

The second objective is not to have too much of your companies assets tied up in inventory (position sizing). If you are forced to sell off this large inventory at a loss than there may not be enough cash coming in to the business longer term to keep the businesses going.

What trading authors have tried to do is build small business money management principles in to their books that trader’s can use in their trading business. However traders often discover the glittering generalities of money management principles do not work for them in live trading situations. These traders have failed to recognize their trading business requires a unique plan.

Money management is cash flow management that is part of every trading plan - even if it is blank. How well cash flow is quantified and monitored in the trading plan makes or breaks most traders. The best trading plans keep cash flow consistent with the minimum of negative disruptions (drawdowns and outlier losses).

Traders seem to think they are alone in this world of business failure. I hear “90% of traders don’t make it long term”. Tell this to restaurant owners. They fail at the same rate for the same reason – money management. Well, traders fail quicker; that’s baloney. I got stiffed by a restaurant owner who bought a computer off me in the 1980s. He had not even opened the doors and he was broke.