Trading Commodities and Financial Futures: A Step-by-Step Guide to Mastering the Markets, Third Edition

Secret 7

Money management is the key

Think about money management daily. You do not necessarily need to have a high win-to-loss ratio, but your average win must be higher than your average loss if you want to succeed. To do this, there must be (at least some) “big hits.” You have to maximize some trades. You need these big wins to offset the inevitable numerous (and hopefully small) losses that are inevitable. I've found being able to cut losses early, by even a small incremental amount per trade, say $100, can make a major difference to the bottom line. This takes decisiveness, so be decisive if the trade is not acting right. Waiting for a few more ticks is generally not a recipe for success.

One more point here: It is bad practice to cancel ...