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The importance of money management

Before discussing the importance of money management in trading systems, I’d like to ask you to consider a question:  


What is the nature of the transaction?  I’m trading in gold, right?  Is the oil?  Is the dollar?  Is the euro?  Is it rebar?  Is it iron ore?  That’s what it looks like;  But essentially all speculative financial market transactions are risks.  No matter what we buy or sell, we don’t really want that gold oil or rebar;  We just want to profit from the change in the price of these products.  

All investment is about the future;  Faced with future price changes;  The future means the unknown;  Unknown implies uncertainty;  Uncertainty means risk;  Therefore, all trading activities, whether in the stock market, futures market and foreign exchange market, are actually trading risks;  This is the nature of speculative trading.  


Of course, many enterprises buy and sell futures contracts through the futures market to hedge the operating risks of changes in raw material prices or exchange rates.  But this form of hedging has nothing to do with speculative traders in markets like ours.  


Speculators trade in risk;  Since trading is based on risk, the importance of money management is evident.  


To put it another way: understanding the importance of money management and respecting market risk are the hallmarks of a successful trader.  Attention to risk, positive risk is the best way to solve the risk and avoid the risk.