At the end of the day, money management is a definate part of trading along with fundementals, technicals and the rest of the hoo-haa, but you got speculate to accumalate.
If your a trader that likes risks, then good luck if not then good luck again!
Pshycology plays a vital part in trading, each individual is different and will act different to the markets. Learn what you can before diving in because the chances don't favour the small traders. 90% lose, 10% gain thats an overall average statistic, thats why brokers advertise to attract new investors, because most old investors get locked into shares because they aint got a clue or they simply finish.
Build your confidence which can only be built by wins
Like grey1 said i would have thought entry was the most important part since all your risks start with that.........
kevin546, personally i think your 4 probabilities just show that the quality of an entry is totally dependent on time i.e a good entry for a day trader may not neccesarily be a good entry for a swing or position trader and vice versa.
I don't think entry is anymore important than other aspects of the trade. Indeed how do you divorce entry point from, applied money management, from time plan of trade, from risk management. Its' surely a cohesive whole that works, or doesn't.
Pandering to that human need to make something more important than another.If I had to identify the single most important element. My opinion is it would be time.
the markets are ruthless and so it is about maximising your chances. How can one aspect of the trade be any more or less important than any other? You have to give yourself as much of an edge as possible to be consistently profitable. Random entry is out of the question. I think the whole money management vs. entry debate stems from inexperienced traders erring on the side of entry and paying too little attention to money management. When you get in there with hard earned cash you clearly see that everybody is trying to take your money and you can leave nothing to chance.
Every successful trader I have ever worked with has a defined and generally simple methodology dictating both entry and exits with little room for punting.
Grey1, I do not understand your point . The reason getting out is often more tricky is that it is a more dynamic process than entry as you have a live risk to deal with. How can you say "ENTRY CONTROLS YOUR LOSSES" ?? If this is the case then why not get in and leave it on forever?
Every trade we take is a probability and we get in at what we believe to be a good level at that point in time. Nobody is right all of the time no matter what system they use. As a result, after the trade is placed, it comes down to exits.
Of course I make exclusions for reversal traders or those with infinitely deep pockets.
hmmm, the best entry has to be at the TOP or BOTTOM of the price for the instrument in question, now to get in at the absolute of the two is impossible, but i'd say you can dilute the top and bottom into top zones and bottom zones, the zones can appear immediate or drawn out depending on volatility,price action and volume,time of day.these levels these give good risk/reward opportunities.
now there is a lot of comment on trying to pick tops and bottoms doomed to failure etc and i'd agree if you are trying to get in at the absolute of the two, i'd say thats pure chance if you do, however entry at top zones and bottom zones is a skill that can be aquired or a trading method/plan that by the very nature of risk reward opportunity warrants investigation as a possible entry method for a trader to utilise.
A point to consider is also time of day, volatility,volume,price action, therefore greatest opportunity is at the first 90 mins and the last 90 mins of the trading period (stock index trading)
but a lot depends on so much else, an individuals timeframe, the objectives etc...
havn't looked at forex re volumes,volatility etc maybe someone else who studies forex can comment on time of opportunity relating to these markets.
Interesting you bring up tops and bottoms. A guy named Weist wrote a book a few years ago called , "you can't lose money trading commodities". mmmm....interesting. The methodology he outlines is scale trading. Basically find a commodity that is trading in its lower x% bracket of the last 20 years and then structure a pattern where you buy a number of lots for every X dollar down move and sell a similar amount for every subsequent x dollar up move. Interesting concept and improved on since then with the use of options. The basic premise is that a commodity has a production cost and so downside will ultimately be limited. It is not straight forward as rolling through contango also means you have to realise losses but I know of people who trade this way and have had success over time. It does however requires a great deal of conviction particularly for markets such as Coffee which has only just come into the money after 2-3 years. Sugar, Silver and Copper have all been great examples over the last couple of years. Anybody with a package such as TS can write the code simply also.
to make my point, most people cannot predict tops and bottoms so people develop things like this to overcome that problem.