I’ve been teaching people to trade since 1997 and one of the biggest mistakes that I see people make is not in chart analysis but in money management!
I can pretty much teach anyone to analyze a chart, draw support and resistance lines, triangles, head & Shoulder patterns etc. The most difficult thing for me to do is to teach my students money management. I don’t know why exactly since it’s easier to set up specific rules to manage money than it is to set up specific rules for trading a breakout as an example. I guess this is where fear and greed come into play and where a trader’s emotions tend to run wild.
Good money management is designed to help control the fear and greed that all traders experience. I’m going to do the best I can to show you how to tame the “beast”! By the way, the beast is really self created.

Rule #1: No more than 50% of your trading capital should be used as margin money; the rest should be put into some safe interest yielding instrument such as US Treasury Bills. This way you will never have more than half of you account committed in the markets. You keep your T-Bill account for emergencies like unforeseen draw-downs.

Rule #2: You should never have more that 10% to 15% of you trading account (the 50% portion) at risk in any one specific market group at any time. This means no more than 15% of your account should at risk in the Grains, Meats or Metals at a time.

Rule #3: Only 5% of your trading capital is to be risk on any ONE trade. Even thought you might have say 15% of your account margined in various Grains but that 15% must be spread out over several different commodities such as Wheat, Beans, or Corn with no more than 5% at risk on any one specific trade.

Rule #4: Total margin should be limited to 20% to 25% in any market group. This protects you to some extent since most market groups tend to trade in the same direction in the long run.

These of course are general rules and each trader will have their own needs based on various factors such as risk tolerance and financial goals. One many also need to tweak the rules somewhat if they tend to only trade one market group such as metals, grains or currencies.

Just keep in mind that you must develop your own set of rules and stick by them time and time again on each and every trade you make. Of course your rules must be based on a winning strategy that you have developed. In other words just don’t vary too much from your own rules.