Edge on Money Management

The Edge isn't always about trading method. Applying how you use your account is also an edge, It's a very powerful edge. Let's make an illustration:

Let's say you start with $10000, and for the first week you made $500 which is very good. Then your account must be $10500. Second week you made $500 again and now your account will be $11000. This is where disaster begin. Your brain told you now you had a $11000 on your account and you may tolerance your trade. You trade and losses $200. Your account now $10800. No Big deal...Next day you did the same again until you realized your account goes back to $10000 or even worse less than that. Now you are hurt wonder where the hell your profit go. You cursed and feeling pain and your mental state is destabilize. This goes on and on and on...take and give game, only your account is depleted because of commision.

I don't know what kind of syndrom is this but it happened to me before. I was once up $1000 on my account in less than 2 weeks. I became complacency and much forgiving with my trade. In just 3 days I lost all my profit.

This is when I came to conclusion that I had trouble with success. I had a mental block in this. So I figured out how to overcame these.

I tracked back where I had the most winning probability based on my account position. And it's at the Starting Account. So everytime I made profit I moved to another account and reset to Starting Account.

If I had a losing trade then my tolerance is 5% from my losing account. If I had $10000 than my tolerance would be $9500. That's not all. The next strategy is pay myself daily, depending on my Account. Let's say today I made $100 and the account is $10100. So I moved my $100 to my other account. But if I loss let's say my account became $9900, than I paid myself $50. There's a tolerance that below $9500 I won't get paid.

With this method I kept position myself at the edge. If I trade bad, I won't get paid. It's like I had an invisible boss. And also by 'paying me daily' method I take instant gratification everytime I make a good job. The bad thing is I never got a windfall profit with this method, but it's okay. The objective is Capital Preservation.

The first time I used the method I had 3.16% return monthly, which is a good start. The month after that I made 11.16%. This August I already booked 11.66% from my initial Capital.

I hope my share will help you through your trading journey.

Wish you the best of luck

Let's Trade