Foundations of Trading Part 1: Preserving Your Capital

This is the first in a series of foundational lessons on the principles of trading. These foundational lessons are relevant to any instrument, time frame or methods that you use.

  • Preservation of Capital
  • Market Structure
  • Andrews Median Line Tools
  • Trade planning
  • Self-Management

We start with money management. Because if you blow through your money you won’t last long as a trader. Money management starts with self-discipline, which is the first thing every trader should begin to foster. Preservation of capital is paramount. If you’re not currently profitable, cut your trading size down; you have to earn the right to size. Always use hard stops, which means, put in a stop order at the same time that you place your entry order. Know your maximum risk per trade, and stick to it. My risk management is 1.6% of my account per trade.

We will talk about Market Structure in the next part of this series.