Money Management

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. "

-Warren Buffett



"The whole secret to winning in the stock market is to lose the least amount possible when you're not right."

-William O'neill


I consider money management as the most crucial aspect while dealing in stocks.Trading in stocks without having a sound money management is like ,driving a car which has no brakes.Risk management is a two-step process - determining what risks exist in an investment and then handling those risks in a way best-suited to your investment objectives.

When you are making trades, you should always examine the risk/reward ratio.For instance, if you have measured the risk/reward ratio to be 3:1, then you can safely ascertain that all you need to win is 1 trade (with the spread in mind) and lose 2 trades to break even.