Defensive Money Management Explained

Written by Lawrence Chan
Copyright 2010-2020 All rights reserved

An introduction on money management for traders who are not familiar with the subject and would like to improve their survival chance and profitability.

This book is an ongoing effort with latest chapters added whenever they became available.

Following is a list of the chapters available right now on the website.

Defensive Money Management Explained: Introduction

Part 1 of the series - Introduction to the concept of defensive money management in trading ...

No comment yet

Defensive Money Management Explained: It Pays Being Conservative

Part 2 of the series - Utilizing Monte Carlo simulation to visualize trading risk and understand that initial capital per unit traded is the most important factor affecting your survival in trading ...

No comment yet

Defensive Money Management Explained: How Risk Is Controlled

Part 3 of the series - risk control is more important than seeking higher winning percentage, at least in the beginning stage of building a trading career ...

No comment yet

Defensive Money Management Explained: How To Ruin Your Winning Strategy

Part 4 of the series - the evaluation and integration of multiple trading setups or systems ...


Defensive Money Management Explained: The Death Trap Of Averaging Losers

Part 5 of the series - focus on the pitfalls related to averaging down. ...


Defensive Money Management Explained (Part 6) - The Crash and Burn of a Winning Trading Model

Part 6 of the series - The crash and burn of a winning trading model ...


Defensive Money Management Explained (Part 7) - The Money Management Edge Part 1

Index Page
Most of the time traders looking for profitable trading setups do not think about the maximum risk first. Jargons like high probability setups and low risk entries often dominate the reading materials a trader can find. Those are entry me ...

No comment yet

Defensive Money Management Explained (Part 8): An Example Of Money Management Edge  member only

After talking about how important and powerful money management edge is, many traders would wonder how that actually works in real life. Here is an example trading model illustrating the concept.
Index Page
(member-only content below)
[DTBMemb ...

No comment yet

Defensive Money Management Explained (Part 9) - The Money Management Edge Part 2

Index Page Continue from Part 1 Money Management Edge Is A Function Of Leverage In laymen's term, money management edge is simply how much money you can afford to sink into a hole and how much time you can afford to wait for a position to turn p ...


Defensive Money Management Explained: First Component Of Averaging Down  premium content

Unplanned average down is one of the biggest enemies for traders with limited capital. Planned average down, however, can work and it is much more complex than most people can imagine. Although I do not recommend traders to employ the strategy in the ...


Defensive Money Management Explained: Second Component Of Averaging Down  premium content

Average down on losers madly is one thing. Controlled average down is something else totally. In this article I am going to discuss the second component of strategic average down. Before we start it is important that you do not skip the basic concep ...


Defensive Money Management Explained: The Power Of Compound Growth

Whenever I talk about trading model performance, I avoid talking about exact amount of money to be used and how that can work for you if you put all the gains from trading back into the system for compound growth. There are many reasons why it is bet ...

No comment yet

Defensive Money Management Explained: When Your Trading Style Fails

Quite a number of fund manager and pro trader friends have experienced significant drawdown so far in year 2017. Partly thanks to the uncertainties of the current geopolitical environment, these veteran professionals all have expressed their frustrat ...

No comment yet

Defensive Money Management Explained: How to Evaluate a Trading Strategy (or Your Edge) Objectively  premium content

One of the fundamental questions that we have to ask ourselves when we see a profitable trading strategy is that whether the strategy will reform well in the future. All kinds of testing are invented from walk-forward testing to Monte Carlo simulatio ...

No comment yet

Defensive Money Management Explained: Better Position Sizing

Traders, discretionary and mechanical alike, are often puzzled on how to properly scale their trading with respect to their trading account size. Classic rule of 1% or 2% risk of investment capital just does not work because traders are here to take ...

No comment yet

How to Calculate Sharpe Ratio and Sortino Ratio Correctly on Day Trading Strategies

With all these trading platforms and trading strategy development tools available nowadays, you would think that the industrial standard metrics like Sharpe Ratio for measuring the performance of day trading strategies should all be built-in already. ...

No comment yet