Gann on Money Management (?)
Touring various futures sites I find a lot of stuff that seems sensible, some less so. The following list of rules is credited to Gann. I don’t know if Gann really wrote them, or if it is simply a roundup of money management’s most hackneyed cliches, but they seemed interesting enough to warrant a cut-and-paste entry into the FAQ. • Amount Of Capital To Use: Divide your capital into (10) equal parts and never risk more than 1/10 of it on any trade, (try 5%). In today’s market, you should work with at least $10,000, preferably $25,000, in risk capital and not risk more than 10% on any idea. If you try to work with less capital or don’t have enough risk capital, I believe you should not trade commodities. This capital should not exceed 10% of your net worth. • Use Stop Loss Orders: Always protect a trade with stop loss orders to limit your losses. In today’s market, use a (3) to (1) risk-reward ratio, risking no more than 10% of your risk capital, (try 5%); risk $500 to make $1,500, or d
