I'm going to take the opportunity to call this week, Money Management Week.  A lot of what I'll be posting will hopefully be related to this topic which probably means that website traffic will decrease.  This would not be unusual considering that "on average, traders spend at least 10 times more time and effort on seeking the magic formula for trading than on learning to manage the trade." (Source: Matt Blackman, "Losing to Win")  

I've been very aware of the fact that money management is the most important aspect of trading but hopefully by bringing this subject into the forefront this week will make you and I even more aware.

From a lot of the backtesting and forward testing I've done over the last year, it's become quite evident that winning percentage for most systems are below 40%.  Some hover around the 40% level and others are even lower, reaching the 20%-30% level and below.  According to Perry Kaufman, author of "A Short Course in Technical Trading" and a veteran trader, trend-following systems are the best trading systems around.  But he also states that you can expect 6 or 7 out of every 10 trend trades to be losses, some small losses and some a little larger.  For this reason, a lot of beginner and novice traders wonder how it's possible to ever be profitable trading.  

The point is that the focus shouldn't be placed on how to achieve an unrealistic expectation for your win to loss ratio but to concentrate on money management.  I'll admit that money management hasn't been my prime focus and it's reflected in the subject of my posts over the last year.  In fact, I've only tagged 1 post with the subject money management attached to it.   

This week I'll be gathering together some useful links to money management articles and I'll also be talking more about money management as it pertains to my trading.  Larry Williams, a veteran trader said, "Since losses are an integral part of this game, a strategy is as essential as the proper attitude.  All jobs have good days and bad days so deal with it..."

Losing to Win