What is money management?
Money management is a process that includes several steps: • determining your monthly and annual income • calculating your monthly bills • calculating hidden expenses, such as seasonal expenses and emergencies • setting your financial goals • balancing your expenses to be able to reach those goalsMonthly Cash Flow Calculator will help you to calculate your total income each month and your total expenses for each month.
A. Money management involves placing your portfolio with a discount broker so that it can be traded on a discretionary basis while limiting commissions. You do not give up control of your account or access to it nor do you give the right for funds to be removed from your account for other than agreed-upon fees and, of course, the purchase of investments through the custodian broker.
In a nutshell, money management is based on the old trader’s saying “Cut your losses short and let your winners run.” The idea is to keep your losing trades as small as possible while letting your winning trades grow as large as possible. Elder says, “Every trader has to establish in advance what the maximum amount he or she will risk on any given trade.” In other words, money management tells you how much you can afford to lose on the trade. The advantage of proper money management is that it takes the emotion out of decisions. “When I enter a trade,” says Deron Wagner, founder of Morpheus Trading Group and author of Trading ETFs (Bloomberg Press, 2008). “I am comfortable that the stock might stop out and I will lose that much money. That’s one way you can have sound risk management at the same time that you have proper money management.” Learn about using trailing stops. When you don’t manage your money If you ignore money management, you do so at your own risk. Bennett McDowell, pre
What is money management?