Management-The management of the money, part 1

There are some common mistakes that I’ve seen, dealers in the field of the administration of money making. Firstly, we want to understand what is money management.

The money management overlaps with risk, trade, economics and personnel management, however, has many aspects that make it unique, differs significantly from all other areas of management. In this chapter, we examine some areas of money management, which seem to costly mistakes involve mental quirks.


Kim entered into a short position in crude oil, after studying carefully since many factors is off, as it could be at the time reasonably contained, that his decision to trade. She joined the trade based on his study of the underlying fundamentals has his conviction, crude oil prices soon should begin to fall. Then Kim turns your TV set and begins to see a financial news station. An “expert” in crude oil is interviewed. He begins to talk about how crude oil, it is almost certain that, in this year have come down because the oil companies are doing not much exploration, as they did in past supplies. Kim listens, to what he has to say and then starts his decision on trade in doubt which has introduced. The more you think about it, it will be more panic. She regarded to leave his post, while it will end with a loss. The fact that an “expert” has nothing decided shakes their confidence completely. It leaves the intraday trading and take a loss of $400 prices have not reached, stop protection, was the $700 away from its entrance. Market is not moving it have run far enough for your stop out. For the end of the day, with crude oil futures did a new maximum, and in the following days explodes in a real bull market. Instead of a magnificent win, Kim has a loss. The loss is more than money, that it has lost confidence in himself.

What needs to be done?

You have their own guidelines for negotiations and trade, to what you see. Forget opinion, an own and above all the others. Unless you are a very rare breed whose Meinungen are good enough for the trade, no trade with them.

An evaluation on the basis of facts which have and then go with the trade. So make sure that there is a strategy to remove themselves, before losses become big. Kim had stayed with their original strategy and placement of stop, it would have ended in a happy winner instead of a pitiable loser. (management)

TOO big to eat

Bite more than it can be chewed is a weakness of many traders. This form of trading more than drift of greed and not clearly defined business objectives. The trade only to “Make money” is not enough.

Pete has sold short T-bonds and is now further by a full point. He indicates that he’s money in the trade. With confidence and think that it would be wise to be diversified, occurs a long silver futures position, and also sold options call behind the wheat, it is directed downwards. Almost at the same time, that is on the market, wheat prices explode upward and your calls are in trouble. Pete returns for brief talks and sold to lose additional premiums on the basis of two for-one, buy higher exercise price. To see the end of the day in other positions. Silver had to leave an intraday investment of a bottom because they close at the high of the day. T-bonds have made a day inside, but Pete seem suddenly weak, that is from some tick. At the end of the day, it meets that most of the earned it had in his short T-bonds was used to buy short wheat call options. It blocked that and now has an additional bonus on your account, but also has an additional risk and short calls in a market on the rise – no enviable position is. On the other hand, he is now worried about his future long silver, silver on his depression closed in what appears to be a real investment. You further exacerbate the situation, which has lost faith in himself. Once a happy, easy, winning silver long, it has become an ugly and confusing disorder, and Pete has a good opportunity to finish a loser in three operations. If Pete in this way holds more than trade, it could end up being the poor man on the screen.

What needs to be done?

Break all offices into concrete targets. Be sure to achieve these goals, before you add more items. Even with a single sale in T-Bonds Pete could have created a destination for the trade. All he needed, would have one or two full points satisfactorily than trade as a winner to retire. Then you would have a commercial decision for an additional fee. There are very few operators who can successfully manage several positions in a variety of markets.


Hubris is a special type of case, in the strong rises in humans have, or think that you special information or personal experience, no matter how limited. The small dealer is why hurt negotiations in more information than “hot tips.”

Tim is a farmer. He raised pigs and buy large quantities of food delivered to the pigs. Tim has a large agricultural operation that is very profitable. It takes 250 pigs per week on the market. Due to constant flow of pigs for their operation on the market does not need Tim because cover corporate pork is able to average prices in dollars that you runs from them. But Tim will indirectly electricity costs, what to buy, by what you eat soy Futures purchase, has. Tim hearing time and messages from the farm all day. He attends meetings of other farmers, and trying to collect all information which might help you to be more profitable. But a big problem, Tim called tunnel vision. When looking in the grain fields of the area in which you live, everything you see is extrapolated worldwide.

That is, if Tim sees that the surrounding fields are dry, you suspect that all fields from all over the world must be too dry. One year Tim witnessed a local drought. He had with the farmers in the area and she told me that they really have experienced drought. Looked at the messages in your data source, and almost certainly say that there is a drought in the area. In fact, underwent drought throughout the country where Tim raises his pigs.

Tim was through their own deposits which is not overly concerned. I had a lot of it in their silos previous years record harvest. Tim decided to be piggish and speculate what he as insider information. He called his broker and bought heavily into soy meal futures. Tim was confident. He was sure the soybean meal price increases soon to take advantage of, and that he wanted to make a small fortune. the Tim may have turned into a pig’s greed. Future bought started to move down and the value of his investment began significantly be reduced. Tim could do was to have a broader perspective. Everyone else, the grains were grown, farmers experienced rain in his time. The drought was located almost in its entirety within the State in which Tim has his pig. Tim lost because it is based on the limited knowledge that had. (management)

What needs to be done?

About what we do, to expand our horizons. We need a humble attitude towards markets. We can never give us the luxury of indulging in overconfidence in what we perceive as special knowledge. A merchant can’t afford our vigilance. Tim believed that others had not once made. In this way, also another error made Tim. He heard only what he wanted to hear.  (management)

Listen to what you want to hear – see what they want to see

Marketers call this preferred preload. There are preferred tendency among traders. Once they develop a preference for a trade which distort often additional information to support your point of view. This is the reason why a trader from another form of consciousness choose to ignore what the market is doing. We have seen that traders are convinced that a market increases, when in fact a tendency to depression was founded. We have seen that traders poll their friends and brokers until you get an opinion, it was according to his own and then a trade on the basis of this opinion input.

A student who decided that she wanted to go ours, Fran and her husband, John, and life in the Missouri Ozarks. Everyone told them that there was no way, that they deserve it.

Everyone asked
He advised them not to do it.

Finally serve a public officials of the Church, which is proposed to support them, that they had to there said. From twenty or thirty people who asked that the Minister was the only one who said to get them. Course, it was what they wanted to hear. They sold their home and most of their possessions, gathered for a lifetime. They moved in the Ozarks and it was bankrupt within a year. They had to leave and start again from scratch. John, who had been semi-retired, now had to find a job. Fran has. Had to give up a promising start as a dealer, put food on the table.

What needs to be done?

Each trade to see lens. Do not allow that you married believes. Learn to recognize the difference between what you see, what you feel and what you think. Then drag what you think. Block the entry of others, once you have made a decision. Let not your agent tells you what you want to hear. Never questions you your agent, your friends or relatives for an opinion. Turn on the TV or the radio, you don’t need to see or hear what have to say. Take all indicators graphic discount and just look on the price bars. If a trade still show and then go.

It is in the article about the money management part 2!


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