Chapter 1: Money management — an overview

The more things change, the more they stay the same.

There is no doubt that the environment in which we trade is evolving rapidly. Since the first edition of this book was published in 2005 we have seen the rise of high-frequency trading, the adoption of algorithmic trading robots by retail traders, an explosion in the use of social networking and a significant increase in both the number and quality of brokers catering to retail foreign exchange traders.

No matter how much the trading environment changes and technology advances, the ultimate goal remains the same: to make a profit.

Over the years, in various locations around the world, we have encountered dozens of trading experts who have shared their knowledge through seminars, conferences, workshops, books, software, websites and blogs. In all probability you have also encountered some of the same people. Many claim to have discovered or created a special secret or tool that has helped them achieve phenomenal trading success, while others have diligently studied the methods of successful traders of days gone by. Some are willing to share this information for a token fee, while others attempt to charge truly eye-popping amounts of money based on the promise of untold fortunes to be made. As you would expect, some are worth every cent and some are not (even some of ....