Money Management in Trading

Money Management in Trading

Money management in Trading is essential. In fact, it’s a crucial aspect of any financial market and should be treated accordingly.

Proper money management can help sports traders reduce their risk, protect their bankroll, and increase their long-term profitability.

Here are some fundamentals to guide you, regardless of the level you are at right now.

Rules for Money Management in Trading

Set a Budget

Before you start trading, decide on a budget or bankroll that you can afford to lose. This will help you avoid the temptation to chase losses or bet more than you can afford.

Tip: Don’t deposit the entire budget at once.

budget money management in trading
small money management in trading

Start small

Use minimum stakes when you’re just starting out or trying new strategies. It’s not about the amount. If you are profitable with €2 stake, you will be with a €1,000 stake also. Same, if you can’t be successful with a €1,000 stake, you can’t do it with €10 either. Don’t grow your stake considering that you’ll solve the problem.

React big

Celebrate your winnings. Dramatize your losses. Both winnings and losses should have a significant impact on you. Doesn’t matter if it’s -€1 or +€3,000 at the end of the month. At least it shows you the path you are on.

Flat Money Management in Trading

Flat risk

A staking plan is a method of determining how much you should bet on each trade based on your bankroll and risk tolerance. There are many different staking plans to choose from, including flat staking, percentage staking, and Kelly staking. We advise you to choose flat risk – around1-5% from your budget.

Flat – no progression, no systems / Risk – remember that risk is not the same as the stake

Percentage, not amount

A profit of +€100 means nothing. It might be a good profit if the investment was €1,000. But it could be a bad return if the investment was €25,000. Always check the Return on Investment (ROI) of the trade in a specific period.


Opportunities, not targets

Don’t set targets! 3% ROI this month/week/day. Or, even worse, to set fixed amounts, like €100 target for today…

This will force you to trade even if you don’t have an edge in the market, or when you’re not in the mood.

Also, it will stop you from trading, even if there is more money that is waiting for you there.

Look for opportunities instead and “milk the cow” to the last drop. Don’t stop because you hit your target. Don’t force if you didn’t.

Profit, not winners

Do not confuse green screens with the fact that the person who posts them on social media is profitable. Maybe a €10k win on an occasional trade seems amazing. But it’s useless if the monthly or yearly P/L is negative.

Always focus on constant profit, not on random lucky strikes and jackpots.

Compounding Money Management in Trading
See excel simulation


Albert Einstein said “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

Use a fixed risk (liability) of 1-5% of your budget and update it periodically (weekly/monthly). This way you’ll use the compounding effect without knowing.

After the first year, you end up tripling your bank and your profit, as you can see in the example below…

Month 1

Flat risk (5%):
Average trades/month:

Total invested:

Monthly ROI:






Month 2

Flat risk (5%):
Average trades/month:

Total invested:

Monthly ROI:






Year 1

Flat risk (5%):

Monthly ROI:






Effective money management in sports trading can offer several benefits, including:

  1. Minimizing risk: By managing their risk effectively, traders can protect their capital and minimize their losses. By setting stop-loss orders or limiting their exposure to certain markets, traders can limit their potential losses and avoid losing more than they can afford.

  2. Consistency: By using a disciplined approach to money management, traders can develop a consistent trading strategy that helps them achieve their long-term trading goals.

  3. Maximizing profits: Effective money management can help traders maximize their profits by ensuring that they have enough capital to take advantage of opportunities as they arise. By managing their position sizing and allocating capital to trades wisely, traders can increase their potential profits over time.

  4. Avoiding emotional trading: Money management can help traders avoid making emotional decisions that can lead to irrational trading. By following a disciplined approach to trading and sticking to a trading plan, traders can minimize the impact of emotions on their trading decisions.

  5. Improving trading skills: By keeping a record of all trades and regularly reviewing their performance, traders can identify areas for improvement and make necessary adjustments to their trading strategy. This can help traders improve their skills and increase their profitability over time.

Overall, effective money management is a crucial aspect of sports trading that can help traders minimize their risk, increase their profitability, and achieve their long-term trading goals.