If you ever wanted to understand money management techniques used by professional traders, I highly recommend that you read the book Trade Your Way to Financial Freedom by Van K. Tharp. The position sizing calculator that I uploaded to this blog is based from the book and several of the money management techniques I describe derive from the fundamentals outlined by Dr. Tharp. Other techniques such as technical analysis, fundamental analysis, market psychology and historical wisdom come from the small selection of books that I highly recommend: Recommended Stock Market Books.

I read a fabulous post on another blog yesterday that jumped right into the key money management subjects covered by Dr. Tharp. Trader Mike is a day trader, something I am not, but I respect the way he handles his trading and actually share many common techniques although in different time frames. I don’t know much about day trading but I understand money management and this post may help many of you delve deeper into the study of proper money management techniques. The blog post, My Path to 100 R in Profits from Day Trading , also shares a bit of his psychological thought process as the he explains why his returns were hurt slightly at one point last last year and how he will correct that going forward.

Whether you day trade, trend trade, swing trade or even buy and hold for longer periods of time; proper money management techniques are a must and understanding your own investor psychology is key to becoming successful. Enjoy!

Piranha