A Trader’s Money Management System: How to Ensure Profit and Avoid the Risk of Ruin

“Half of life is luck; the other half is discipline – and that’s the important half, for without discipline you wouldn’t know what to do with luck.” Carl Zuckmeyer

Bennett McDowell has a passion for converting traders to being “disciplined” traders. His book reads like a friend or a coach passing along some hard-earned, valuable truths. He first puts forth what he considers the foundations of trading success and goes about covering each item in turn. They all revolve the concepts of discipline and protecting yourself from catastrophic losses in your trading account.

To achieve the first he emphasizes the use of stops on every trade, and diligent record keeping. The second builds on the first. Stops are integral to determining the optimal trade size for every trade in alignment with managing your exposure to the “risk of ruin”. McDowell tips his hat to authors who pioneered the application of risk of ruin concepts to trading and who provide a more advanced and academic analysis. Meanwhile, he provides street level guidance for someone new to money management techniques in a straightforward set of steps.

A feedback loop containing your actual win ratio, payoff ratio, and account size are dynamically used with risk of ruin tables or Balsara’s optimal f formula to set the number of shares to trade in each transaction. All this is done to enable you to absorb losses and still survive to trade another day.

McDowell accomplishes his task of introducing traders to this critical topic in a clear manner allowing you to immediately implement his recommendations. Money management is one of those topics that you’ll come to appreciate sooner or later. Whether you learn it now, or learn it later, “A Trader’s Money Management System” provides a solid initial grounding in money management techniques for traders.

Bought this book less than a month back. Got it thru a friend since I live halfway across the globe. Spend less than 4 days finishing it. It is not as complete as I would like it to be (missing risk of ruin tables found in another money management for futures book) but it deals with the basics of money management. Spends a lot of time trying to convince the reader the importance of money management, which I found essential because if the reader doesn’t believe it, the information is useless.

It gives a basic record keeping forms which I find extremely useful and am going to apply it.

I believe money management plays a bigger/more important role in being a successful trader than chart reading skills. An essential book for anyone who is serious about trading (be in stocks, options, currency, futures etc.)

This is the greatest book on money and risk management!
Money Management is one of the most important aspects of trading, but it is a complex and boring subject. Mr.McDowell makes some of these complex concepts (like the risk-of-ruin tables) and formulas easy to understand and interesting. You don’t need a Ph D in mathematics to implement them. This book has elevated my level of awareness of the importance of integrating trading strategies with good money management.
The next big thing this book provides is “The Trader’s Assistant Record Keeping System”. Good and accurate record keeping are vital to any successful business. Appendix B of this book provides all the forms you need for your trading business. This one alone is worth more than the price of this book.
Also, the services from the home office are excellent. Jean returned my call promptly (even on a Friday afternoon) and she is very friendly and helpful. Thanks Jean, you are great! Now, I am going to order Mr. McDowell’s other book: “The ART of Trading”.

Have been trading currency markets for a number of years. Found McDowell’s book to be extremely practical. Lots of examples made it easy to connect the dots specially for people that have not done this before. Since the basic principles illustrated in the book apply across multiple markets, I would have liked to see a little more diversification of examples across other markets, such as forex, particularly with the record keeping examples. All in all, highly recommend it.

I found A Trader’s Money Management System extremely valuable and informative. In this book Bennett McDowell divides money management into five parts: The Psychology of Risk Control, Stop-Loss Exits, Trade Size, Record Keeping and Design Your Own Plan. In the Psychology of Risk Control section he discusses the need for a plan of risk control then presents ways of uncovering your psychological makeup which either aid or hinder your trading. Then he outlines a systematic approach to turning your weaknesses into strengths on the way to a trader’s mindset. In the Stop-Loss Exit section Mr. McDowell makes a case for stop-losses and gives rules and their uses in different market conditions. The Trade Size section was fascinating, perhaps because I am a math major. Here he explains the tables and formulas for determining the amount of capital to risk, the trade size to achieve this and the probabilities for risk-of-ruin based on your personal success ratios. The Record Keeping Section explains the use of ledgers and score cards to track your trades and analyze your success rates which is vital to becoming a master trader. Finally in Design Your Own Plan Mr. McDowell puts it all together with a step-by-step checklist and personal questionnaire to help you design a realistic and workable plan that you can implement on a regular basis. This book is well written and concise. I highly recommend it for all levels of traders.

I am not a buyer of Bennett McDowel’s software, after having reviewed it, but I think this book is defintely worth the time. Money management is a too often ignored part of trading, and yet this book convinces me it is critical.

The book provides an effective strategy of money managment for “day trading” and “general stock investing”. The focus is primarily on the “day trading” money management. However I would strongly recommend this to the average investor, to learn money managment concepts and the reasons for significant losses and missing major gains in their portfolio. Applying these strategies to stock investing would have significantly improved my return over the last several years. The downside to the book is that in the last two chapters they are trying to sell their services and products for tracking and reporting on “wins and losses”, etc. A very similar reporting feature is available in MetaTrader 4.
Overall, I would still strongly recommend the book for the money management concepts and strategies. You’ll make more than the cost of the book on your next stock investment.

Never trade more than 2% of your total capital. There, you no longer need to read this book because there is nothing else of value in it.

place stops let profits run , advanced traders have higher risk tolerance, really really basic, not worth the price at all, a media for selling some other a.r.t system based on triangles to people, really a scam within a scam

Just the usual – you need a plan, stop-loss – and nothing, but nothing original. At least nice reviews from other readers…

Like many other aspiring traders, I started by focusing on trading systems that promised high rates of return. While these may have worked well for others, my lack of understanding and discipline regarding risk management, trading mindset and record keeping was more than enough to sabotage my trading them successfully. It’s this dilemma that Bennett McDowell addresses with this book, and he does it in a way that skips fancy approaches in favor of a simple, time-tested set of tools that even a novice trader can understand and put to immediate use. Well worth the cost, especially for beginners, and almost certain to spare you both unnecessary losses and loads of frustration.

I will recommend that book for beginners traders. I read a lot of books. The informations here are essential and concrete.