Traders Toolbox: Money Management Part 2 of 4 Revisited...

Trader's Toolbox

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Money Management

"Crucial but often overlooked, money management practices can mean the difference between winning and losing in the markets.
-Amount Of Money To Risk- It’s difficult to come up with hard and fast money to risk on different markets and trades. For our purpose, though, it’s best to think conservatively. Although some studies suggest initially allocating equity in broad terms of original margin (40% to 50% of total equity committed to the markets at a given time in the form of original margin, 15% to a particular market, 5% to a single trade, etc.), many traders consider these percentages too high, and do not consider the market to be a accurate measure of risk or a sound basis on which to allocate funds, because a trader can always, technically, lose more than the margin amount. These traders find it more beneficial to think in terms of the actual money amount they are willing to lose on any particular trade or trades, determined by their stop level or through some other calculation..."

Revisit the Trader's Toolbox Post: "Money Management Part 2 of 4" here.

5 thoughts on “Traders Toolbox: Money Management Part 2 of 4 Revisited...

  1. This decision is based so much upon how much money a person has, what commissions they are paying, whether or not they are active or passive investors, etc. Then, after all these issues are determined, one can decide what the optimum amount to invest in a stock or sector might be. At least that's my 4 cents.

  2. Help!

    I bought BRF when the trade triangles were green (around $50). I set up my stop loss @ 8%. Now my problem! I watch the weekly triangles for timeing. A red sell triangle has appeared on this etf which is higher than my stop loss dollar amount. Question: Should I stay with my plan that you teach us to do or sell with trade triangle?



    1. Jack,

      May I ask if you are using the suggested method (Monthly Triangles for trend, Weekly Triangles for timing), or if you're looking at this short term (Weekly Triangles for trend, Daily Triangles for timing)?

      I just looked the chart for BRF and although there has been a sudden decline in price, the weekly and monthly trend are still pointing in a positive direction which I would indicated a suggested long position. If you are trading using the suggested method, I don't see where you would have gotten in at $50. The last few set of signals we had would have suggested that you do this:

      Enter on (monthly as initial) 8/3, long @ 34.17
      Our on (weekly red) 10/28 @ 39.84

      Profit of 5.670

      Rre-enter on 11/9, long @ 46.43
      Holding long position, current price @ 50.40

      Basically,you would not have to "sell with trade triangle" if you are following the suggested method. If you want to give our support team a call, they will be able to walk you through a scenario using the "Trade Triangles."


      Lindsay Thompson
      Director of New Business Development & MarketClub

      1. Lindsay,

        Thank you for the reply. I am fairly new to Market Club and my history doesn't go back as far as you indicated. I am trying to follow the month as the trend and the week as timing. I bought BRF on 1-12-10 when all signals were green at 50.20 with an 8% trailing stop. On 1-20 a red triangle popped up at 48.25 which was higher than my stop. That is what trigged me to write and ask my question. As it turned out I was stopped out at a loss.

        Should I not have bought BRF at the higher point? So If I am coming in late what is the suggested time frame to buy when the monthly is green and the weekly is green?

        I am still in the learning stage with this program and all the help would be appreciated.



        1. Jack,

          Thanks for the clarification. I think I better understand the situation. At your entry point, the Chart Analysis Score would have been a +90, still suggesting that the intermediate and long term trends were pointing in a positive direction. You would have held your position and then sold on the 20th at that weekly signal like you said you noticed.

          You win some and you lose some, but I would try to get in closer to the most recent signal. There was over 2 months in between the last weekly signal on 11/9/09 and your entry on 1/12/09. Getting in closer to the signal will try to catch that move instead of coming in when things are starting to deteriorate. With the price action of the week you got in, I don't think there was a way that you could have looked at the score to determine it if was a good entry time or not.

          +90 would still have suggested a long-term up, unfortunately with the gap-up, the score did not fall as quickly as the price and it did not hit the timing thresholds to alter the score within the time of that big drop.

          All in all, try to get into the market closer to the most recent signal. The score will normally be a good indicator of if the signal is still fresh looking at the timing thresholds for short term, intermediate term, and long term trends.

          I hope this helped. Feel free to give the Support Team a call if you have any further questions @ 1-800-538-7424.


          Lindsay Thompson
          Director of New Business Development
 & MarketClub

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