If a trader trades without capital management, it is very difficult to succeed in the long run. Although professional traders have different ways to manage capital, they always have a plan to manage capital when trading.

Often the most basic rule of capital management is to never risk more than 1% to 3% of the equity for a trading strategy and not risk more than 5% to 8% of the total equity. a number of transaction orders. That means that, if your account is 5000 $ then you should not lose more than 50 $ to 150 $ per trade and should not lose more than 250 $ to 400 $ for the total number of orders.

From there you depend on the stop loss and the amount you accept the risk to adjust the trading volume accordingly.


This is the simplest, easiest to grasp the way to help you limit risks, protect your account during trading. When you have good capital management, the rest is to focus on trading according to the plan. Of course, every trader needs a good method to be able to make profits in the long term.

There is no lossless method and no trader can trade without loss. Professional traders also only have a win rate of about 50% but they still achieve high returns. One of the factors that help them do that is due to strict capital management and avoid excessive risk trading.

To properly manage capital, traders need to solve three problems: Risk, profitability, and overall efficiency of the system. That means that the capital management must also consider the method, the entire account, and the trading process, not just evaluate individual trading orders.


Unlike gambling, in trading, we can change the odds in our favor. To do this, we need to trade disciplined and planned before trading.

Capital management formula by Larry Williams

Larry Williams is a veteran trader with decades of experience, he was the winner of the World Trading Championship in 1987, turned $ 10,000 into $ 1 million. The capital management formula of Larry Williams is as follows:

(Account Balance * Risk Percentage) / Maximum Loss = Contracts or Shares to Trade.

"Perhaps there are many better and more complex approaches, but for someone who is not as good at mathematics as you, this is the easiest and easiest to use," he said.


This method also helps traders to adjust the percentage of risk according to their trading style. It is this capital management that has helped Larry Williams manage transactions effectively for decades and earn millions in the market.

Professional traders' way of managing capital is sometimes very simple. For us, no matter how complicated or simple, you just need to choose the method that best suits you and apply it throughout your trading career to see unexpected results.