There is a lot of talk about money management among financial traders.
Almost every book ever written on financial speculation goes into this aspect of financial trading, yet very few people seem to understand it when it comes to the actual practicalities of applying it in their trading.
Money Management for most people is about using a certain percentage of their investment pot or risking x amount of dollars on a trade and placing a stop loss in the market to limit damage protection, while using a profit target which is normally 2 to 3 times the risk, that's about it.
Although the use of a stop loss is certainly the first step towards protecting your investments, but there is certainly more to trade management than the use of a hypothetical profit target.
I like to call it Position Management, this is an integral pat of managing your money and protecting your investments once you are in the market.
Think of it like driving, you don't only make use of the brakes but also steer to protect yourself from a developing hazard.
Once your position is on, your job is to manage your trade well by having a constant eye on the market scanning for a sudden change in investor's sentiment.
This will not only protect your investments and have you out of the market before your stop loss is hit, but can also help you turn your losing position into a profit.
In Financial Speculation, position management is what makes the difference between winners and losers.
The use of a stop loss and a profit target is just the beginning of an interesting story...