Does money management trump stock picking?

If you're reading this, then you clearly have an interest in improving your trading returns. One of the surest ways to do that, is not so much by picking the right stock to invest in, but rather incorporating sound money management principals into your trading.

We recently had a MarketClub member on the Members Blog who was claiming that he had lost a tremendous amount of money using the Trade Triangles, trading in the FX market. Doing the math, I just couldn't figure out or understand how he could have lost the money he claimed he had lost. I thought that the matter was closed until one of our members came back with a reply. Frankly, it is a perfect reply and one that applies to everyone who has traded or is presently trading.

Here is the member's unedited response:

"Market Club Trade Triangles are "wrong" over 50% of the time, on average. But the percent a system is right or wrong is of very little importance to overall profitability. I have a friend who makes millions each year being right 28.7% of the time. It comes down to positive expectancy and money management. If you try for a home run on a single trade triangle, that's like a casino betting everything that a single gambler in their establishment is going to lose. The way casinos make billions is by betting that, overall, people will lose more money than they make. Same with Market Club.

The trade triangles are simply indicators that something is going up. By definition, they HAVE to give a positive expectancy. It is impossible for something to go up without triggering a trade triangle. But this is different than saying that every trade triangle means the security is going up. It's like fire: not all smoke comes from a fire, but you cannot have fire without some smoke.

If you lost as many pips as you say, you should examine your money management strategy. A lot of people have made a lot of money from Market Club. It can be done!

Good luck!"

If you have been trading for any length of time, I think you will agree with the member's reply. I have seen programs that are correct 80% of the time and still lose money. Always remember, profits take care of themselves, losses can kill you.

If you would like to learn more about how you can benefit from sound money management rules and how important they are to your trading success, CLICK HERE

Money management is as important, or perhaps even more important than picking the right stock to trade in.

The good news is MarketClub can help you achieve both of these goals easily and successfully.

Every success implementing money management into your trading this year,
Adam Hewison
Co-Creator, MarketClub

2 thoughts on “Does money management trump stock picking?

  1. Couldn't agree more..
    In addition the person in question should certainly have been paper or simulated trading BEFORE losing large amounts of money live as well. That way the money management lesson would have been free...

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