money management

Lesson #3 - before to setup your trading plan, learn this magic formula about money management

The Hope of Gain Formula + The Risk computation is the basis of the money management

I will repeat that each time I can but the base of your future success will be money management more than your ability to recognize a pattern, enter right or exit right.

And a formula can help you a lot. This formula is quite simple. You will compute a "hope of gain".

If you make 10 trades, win 6 and lose 4, you have a winning percentage of 60%, losing one of 40%, right?

Ok,

If the average win for the winning trade is 20 USD and the average loss for the losing one is 30 USD, you have :

Lesson #1 - Understand the basics of trading is understanding how much you will lose.

Trading is a matter of loosing

After the 2 first article dedicated to the global sense of trading: " is simple " and the choice of your first "strange partner" (the broker), we will speak about losing.

Indeed Trading is a matter of what you will lose. To stay in the game, you need to control this aspect. How much you will lose when you will lose because you will.

For that, you need to understand some basics figures and computations you will need to know to see where is your risk.

Indeed you will choose the amount of money you will play - the lot size - thanks to the risk level you will take.