The job of a trader is to PROTECT YOUR CAPITAL while minimizing your risk and maximizing your profit. Money Management allows you to stay in the game long enough for you to fine tune your psychology and system so that it consistently makes money. Money Management can be made into a very complex process using advanced statistics and algorithms but my goal here is to make it a relatively simple process so as not to create analysis paralysis. If you want to be a successful trader, you have to use proper Money Management techniques.
The key components of Money Management are: