As you may have heard me waffle on, Capital Management is the most important component of your trading methodology. If you don’t have any at all then well forget it, your account will be dry in no time at all. But in the same way if you don’t respect it, you can have some major ‘whipsaw holes’ in your capital.
I think it’s time we actually took this ‘Capital Management Plan’ a step further as there’s two important parts to managing your capital.
No. 1 Stick to Your Capital Management Plan
This is a simple process. Look at how much cash you have. Revise your draw-up and drawdown targets from the FX Pro Trader Course ‘4 consecutive loss rule’ and stick to it!
This should be a systematic approach and one not that hard to follow.
For some weird reason as soon as anyone starts having a run of winners this plan goes out the window and it’s on for young and old. “I’ll make $100K this week, from my $5K account”….. ummm no that’s not going to happen.
“Don’t override your capital management plan” is a key rule for long-term success in trading and investing. A capital management plan is designed to protect your account from large losses by setting clear limits on how much you risk per trade, how many trades you take at once, and how you handle draRead more
“Don’t override your capital management plan” is a key rule for long-term success in trading and investing. A capital management plan is designed to protect your account from large losses by setting clear limits on how much you risk per trade, how many trades you take at once, and how you handle drawdowns. Overriding this plan usually happens when emotions take control—such as increasing lot size to recover losses, removing stop-losses, or risking too much on a “sure” trade.
Sticking to your plan ensures consistency and keeps losses small enough for your account to survive bad trading periods. Capital preservation is more important than quick profits. Traders who respect their capital management rules stay in the market longer, think more clearly, and give their strategies enough time to work effectively.
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