People often say that successful trading = psychological control + money management + analysis system. However, in fact, most people ignore the issue of money management.

Let's play a money management game: Let's play a game with a 60% winning rate. You have 1,000 yuan and 100 betting opportunities with odds of 1: 1. So, how do you bet to get the most benefits?

Before reading the following, I suggest you think about this question. According to surveys, people tend to bet more in unfavorable situations and bet less in favorable situations.

Reflected in the market, people often expect a rise after several consecutive declines, or a fall after several consecutive rises. But this is just a gambler's fallacy, because the chance of profit is still only 60%. At this time, fund management is extremely important.

Suppose you start the game with 1,000 yuan, and lose three times in a row (this is very likely to happen), and now you only have 700 yuan left. Then, most people will think that they will win the fourth time, so they increase the bet to 300 yuan (to recover the 300 yuan loss). Although the probability of losing four times in a row is not high, it is still possible.

Then, you only have 400 yuan left. To recover the loss in this game, you must make a profit of 150%, which is not a good chance. Suppose you increase the bet to 250 yuan, then it is very likely that you will go bankrupt after four games. In either case, it is impossible to make a profit in this simple game. Because there is no concept of money management, the risk taken is too great, and there is no balance between risk and opportunity.

People believe that 70% of traders lose, 10% break even, and only 20% make money, so simply reducing the size of the position to a very small number can move a trader from the 70% losers to the 10% who at least break even. If you are eliminated, then you can't continue to trade. You have to make sure you can continue to trade. However, most traders often get eliminated before they have a chance to win.

One bad turn of luck and they'll lose it all. It's imperative that you stay in the game. Imagine if you could turn things around with just a slight tweak to your approach, what would you do? You just stay alive and keep your capital going through the inevitable dips. You need to make sure you stay in the game long enough to acquire the skills and information necessary to be a successful trader.