Morning Seancass,
The primary objective, whatever one's time frame, is to have a method of entering and closing trades which give a positive expectancy, ie it makes a profit on 'level stakes' ignoring drawdown. Let's say, for example, you find you can be correct 40% of the time and your winning trades make twice as much as you lose on the bad ones then, if you manage your money well, you can retire. Do it badly and you will go broke.
There are many ways of doing it badly, one facile example is chasing losses by increasing stakes. Take the simple roulette method of doubling up after each loss until a winner arrives and consider how capital will disappear into the ether. The following is the progression of stakes - 1, 2, 4, 8, 16, 32, 64, 128, 256, 512, 1024, 2048, 4096, 8192, 16384, 32768, 65536 ... etc. At this stage you are well over £100,000 down with the next stake being £130,000+ simply to recover your losses and win £1. You may win in the end if you can take the drawdown but don't think losing runs on evens chances (a little less accounting for the zero) of 20 or 30 or more do not happen - they do.
Good management isn't a question of how much of your capital you stake on each trade it's a question of how much of your capital you RISK on each trade and how you control that will depend on your style of trading.
Think about this. US stock traders typically make their trades in lots of 1000 shares. If stock A is priced at $25 and B at $50 and the same % stop is used then the risk taken on stock B is double that on stock A. Would it not be sensible, for starters, to control risk by staking half as much on stock B (ie buy 500 shares) as the stake on stock A.
Van Tharp's book (Trade Your Way to Financial Freedom), although full of psychobabble and tedious reading offers a good foundation in money management. Give it a try.
Oldun
