I recently saw the following comment regarding money management:
“Every system in our report uses very simple money management: Trade one contract per trading signal in the markets specified by the vendor with no pyramiding.”
This is NOT money management. If you ever see anyone declare the above as money management walk away fast as you are about to be conned. Money management is not some set amount of shares or contracts picked out of thin air. Money management answers the question of “how much?” At all times, given the risk you are taking, the money you have, and the volatility of the market — you must know the optimal number of shares or contracts to be long or short.
Enjoy this post? Check out Lou Holtz’s View on the Bullshit talked about the divide in America.