How important is money management?

The following is from an email exchange between myself and a client who has become a close friend. This man is a professional trader working for a select group.

See what he thinks about Money management!



4/21/04

How funny life is, I was cleaning out my office at home the other day and I turned up your course on audio tape and as I have lots of time on my hands I popped it into the tape deck in my dealing room while I was running the setup for the next trade in my strategy.

Well out pops Joe talking about money management, now I am thinking Yeh if I did not know this I would have gone down the toilet so many times in the past I could not count, which is more important? Well a crappy analyst can survive if his money management is intact but how many good strategist have I buried because they could not control the finances, I have lost count.

Then I was listening to what you where saying and what xxxxx has said over the years and I started hearing similar phrases, it would seem anyone has been around this game a long time must either come to the same conclusions or they won't ever last long enough to be around a long time.

While no wants to here about money management with out your just a statistic, road-kill for the larger players, you can tackle the market in variety of ways but you can only look after the money one way, carefully.

So 5 years on and the point was the message was loud and clear and more valid than ever if only more traders spent more time on this and less time looking at charts they would do so much better over the long haul, another comment yes the best trading strategies have the largest single draw downs but the best % of wins over losses in a series, but most traders want all the trades to be winners. This is their biggest down fall down all good systems have bead trades but all bad traders try to make systems that work all the time with no draw down.

After listening to this many years later I can understand your trading style even better and we are not that different. j

Regards
P T
_____________________

My response:

P,-- The best traders I have ever taught or know, have made comments very similar to those above- One Money manager said he listened to the course once a year and again if he had a big draw down- I re-editeded the damn thing for MP3 a month ago and I was helped- Really!

I've long since given up talking anyone that wants to make a career out of this into anything-- I recommend and that's that-- the winners study Money management-- the whiners don't.

xxoo
j