Just as in every day life and business there isn't simply one rule to achieve success! Anaylitical and creative thinking applied to price action and money management = long term success. One natural outcome is a constant need to improve on current excellence and humility. As the market evolves so does the professionals' strategy. Regards Johno
Just to throw a question out there. If you had to choose, would you be a great trader and an average money manager or an average trader and a great money manager? I understand both is needed to succeed but in reality, which carries more weight? Also, in reality you rarely see those with both skills at an elite level. My thoughts are a great trader/average money manager will get rich but won't stay rich. A great money manager/average trader may never get rich but will never go broke.
Hi Prophet, Great money manager /average trader. In a nutshell, assuming that he has a profitable technique. The longer he's in the game, the more likely he will improve as a trader. The miracle of compound returns virtually assures that over time this trader will be financially successful and probably end up extremely weathy. Generally people in a great rush to make their fortune, end up losing the lot. Best Regards Johno
Myself, Great trader/average money manager. Here is my thoughts as to why. I believe the most concentration should be on making money. Rather it be in trading or any other job or carrer. One must have money before money can be managed. A great trader can lose a majority of his account to poor money management but be able to get it back because he has the skills of trading to make it back. In my opinion, most traders are very conservative due to many losses they took in learning to trade and once they learned how to trade they go conservative because they are scared of losing and have a vivid memeory of what losing money is like. I hear the argument all the time low risk for steady return over a long period of time. However, we are all traders and we all know it comes with an above average risk. If that wasn't the case we would all have our money in banks earning 3% interest with a balance not to exceed $100,000 in any one bank as to be FDIC insured. But shouldn't your risk be in relation to your skills as a trader? My opinion is a more skilled trader can take more risk which in reality it is not any more risk than the next trader because the risk should be in relation to his skills. I will put this theory to test as I will start a journal based on a live account for a high leverage larger risk system I am almost completed with. I project I will take the system live September 2008. And if I am wrong I am okay with that too and you guys will have my blessing in saying I TOLD YOU SO.
Hi Zeno, Personally, I prefer thinking more like an SP bookie! Prophet, we appear to have very different views on what money management actually consists of. Good luck with your journal and no doubt in the fullness of time all shall be revealed. Best Regards Johno
Hey Johno, actually we are not that far apart as you may think. From your previous post wouldn't the opposite be true as well. Over time wouldn't a great trader improve on his money management over time? I manage money for trust deed investments for a living and I would estimate that 80% of my investors have lost thier fortune or a good part of it atleast once before they made it back and then some as they learned more about managing their money. The other 20% was inherited money and they were tought money management from thier parents at an early age. What I leanred from these investors that made thier own way in business was first, they became very very good at thier business and as thier business grew they learned the skills to manage the business and the money made from it. Johno, the point I am really trying to make is this, in my opinion I believe if one is going to trade then become the best trader you can be and let your money management catch up to your trading skills. Now if money management is your first priority then you're a money manager first and a trader second. And if that is the case it would make more sense to put the money in the hands of the best traders and manage that risk accordingly? That said, one can not be a successfull long term trader without more than adequate money management skills.
It depends on how much money you are managing, but in general it is a true statement. The problem is when you have $5000 and trade the mini futures you can get crazy and start trading 2-5 lots and multi futures too - then you are in no position to talk in money management as one adverse move and one freezup in action and you are WAY over your head. I guess taking positions in relative to account size is money management too....so YES, YES and YES!
Excellent commentary. Although I would add that the greater your edge (hence trading skills) the faster you get to the target. Compounding with outstanding money mgmt skills and a .0001% edge (assuming your initial capital is small, you'd likely die 1st), can take quite a long time to reach fruition. Nevertheless, a trader with superb instincts that bets 100 times the farm each time will get smoked eventually (LTCM anyone?).