Tim Trush & Julie Lavrin introduce

True Money Management

Your guide to financial freedom.

Tim Trush, Julie Lavrin, T&J Profit Club, 200 , !ll rights reserved

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Table Of Contents
Chapter I: Why do traders fail?
I.1. A shoc ing e!periment""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""#
$al%h &ince is a "ell 'no"n financial investor. (e %erformed a ver# famous e)%eriment 'no"n as the $al%h &ince e)%eriment. *nl# t"o students out of +0 "ere able to ma'e mone#, the other ,- failed to succeed. .h#/0

I.$. %o& a good strategy 'fails("""""""""""""""""""""""""""""""""""""""""""""""""""""""")

.e "ant to give #ou a clear ans"er "h# most traders fail even if the# have a "inning strateg#.

Chapter II: The secrets

II.1. *sychology secrets"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""+
! ver# small %art of all traders reall# understand what distinguishes good traders from bad traders. You are %robabl# bombarded "ith guaranteed mone# ma'ing methods. .hen someone can1t succeed, he thin's that the methods don1t "or' or don1t "or' for him.

II.$. Money secrets"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""",

You 'no" "hen to enter the mar'et and "hen to e)it. 2ut something is missing there... the strateg# doesn1t tell #ou ho& much money #ou have to ris' on one trade. The "orld1s to% traders are trading counterintuitive. The# are behaving differentl# than 3normal4 %eo%le. The# act li'e a mone# ma'ing machine.

Chapter III: Achie-e e!ponential earnings and ne-er fail

III.$. Achie-e e!ponential earnings""""""""""""""""""""""""""""""""""""""""""""""""""""".
2asic and advanced mone# management. This is the heart of this boo'. 5et rich 6uic'0 This is the "a# ho" ne" multimillionaires are born.

III.1. /e-er fail""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""10

7uccessful traders are %re%ared for the "orst %ossible situation. 8nsuccessful traders ho%e it "ill not ha%%en. ! math formula that "ill shoc' #ou.

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Chapter I: Why do traders fail?

I.1. A shoc ing e!periment

$al%h &ince is a "ell 'no"n financial investor. (e %erformed a ver# famous e)%eriment 'no"n as the $al%h &ince e)%eriment. (e too' +0 Ph9. students and set them u% to trade "ith a com%uter game. :o", these fort# %eo%le all had doctorates, but ;r. &ince made sure that none of their doctorates involved an# sort of bac'ground in mathematical statistics or trading. <n the game, the# "ere given =>,000 and >00 trades, "ith a ?0@ "inning %ercentage. The rules "ere sim%le. .hen the# "on, the# "on the amount of mone# the# ris'ed. .hen the# lost, the# lost the amount of mone# the# ris'ed. 7o, after all +0 students had com%leted their >00 trades, ho" man# do #ou thin' made mone#/ *nl# t"o students out of +0 "ere able to ma'e mone#, the other ,- failed to succeed. $ecallA the# had ?0@ "inning %ercentage. < means that the# "on ? trades from >0 in average. The odds "ere in their favour, so why the# lost mone#/ .h# onl# t"o students out of fort# "ere able to "in/ <t doesn1t ma'e an# sense0

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I.$. %o& a good strategy 'fails(

<t is not the strateg# B it is the trader "ho fails. That1s the truth. The e)%eriment sho"s that most traders fail even if the# are trading a "inning trading s#stem. Cor that reason "e had to "rite this boo'. .e "ant to give #ou a clear ans"er "h# most %eo%le fail to ma'e mone# consistentl#. <magine #ou are one of the students. You bet =>00 and "in =>00. You bet another =>00 and "in another =>00... and #ou feel rich. !nd suddenl# #ou lose =>00. You are laughingA =>00 loss is not so big, ho%e < "ill "in ne)t time and recover that small loss. 2ut #ou lose another =>00. You become uncertain and since #ou "ant to recover #our t"o losses as 6uic'l# as %ossible Dit is a normal human behaviour called greedE, #ou bet =200 to get =200. You are %ra#ing to "in. .hat ha%%ens if #ou lose again/ You become ver# angr# and "ant #our mone# bac' immediatel#0 This is the "orst situation B #ou let #our emotions to control #our trading decisions. Crom that %oint, #ou "ill %robabl# never recover bac' and blo" out the "hole account. You "ill bet more and more in ho%es of "inning bac' all amount in one single trade. <f that luc'# trade ma'es #ou rich, then good luc'0 2ut realiFe that #ou cannot ma'e a living from trading if #ou act li'e a gambler. You need to follo" strict mone# management rules. Remember: Unsuccessful traders are risking more money in hopes of recovering losses quickly !uccessful traders are doing "ust the opposite #reed is your worst enemy You "ill get enlightened after reading the %aragra%h II.$. Money 1ecrets.

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Chapter II: The secrets

II.1. *sychology secrets

.e named this cha%ter 3secrets4 because a ver# small %art of all traders reall# understand what distinguishes good traders from bad traders. You are %robabl# bombarded "ith guaranteed mone# ma'ing methods. .hen someone can1t succeed, he thin's that the methods don1t "or' or don1t "or' for him. These traders sta# in a vicious circle. !nd unfortunatel#, the# leave one method and loo' for another one. The# are "asting time and energ# for searching the (ol# 5rail that "ill ma'e them rich. The# thing that ma'ing a huge amount of mone# is ver# hard. .hat a Go'e0 <f #ou understand the basic %s#cholog# of trading, #ou "ill be light #ears ahead of the losing traders. The shortest %ath to become successful is to stud# #our o"n %s#cholog#. .e and our students often sa# that trading is the easiest "a# to ma'e mone#. ;ost of %eo%le can1t believe. <f trading "ere so eas#, "h# are there so man# traders not ma'ing mone#/ The# are stud#ing hard, reading all the ne"s%a%ers and magaFines about trading, the# are discussing on the forums but still not ma'ing mone#. The# all do the same mista'e. 7ome of them are e)tremel# stubborn and the# don1t acce%t that it is %s#cholog#, disci%line and %ro%er mone# management that distinguishes good traders from bad traders. /ot the economic education or an# effort. ;ost of our students succeeded in fe" months stud#ing our methods. These "ho didn1t succeed have read this boo' several times. Cinall#, the# have fulfilled their dreams. 7o "hat1s the %roblem that some traders are not ma'ing mone#/ They don$t admit that trading is easy Their a%%roach is too com%licated because the# thin' that if trading "ere so eas#, there "ould be more multimillionaires around. 2ut the real multimillionaires realised that trading is eas#. #reed .e tal'ed about the greed in %aragra%h <.2. and "e "ill tal' again in the ne)t %aragra%h. 5reed is #our "orst enem# l#ing in #our head. Cight it0 !ome people trust financial advisors ;ost of financial advisors give false %romises the# "ill ma'e #ou rich. The# do it for mone#. The real traders share ideas "ith #ou Gust for fun. %ost people follow the crowd The# are selling dollars because all traders in the forums are shoutingA 37HLL T(H 9*LL!$04 The# log on their %latform immediatel# and sell the dollar. 2e #ourself. Remember: The main reason why traders fail is human psychology &nother reason is improper money management

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II.$. Money secrets

.hat reall# is a trading strateg#/ ! strateg# gives #ou entr# and e)it %oints based on some sort of information Dcharts, fundamentals, etc.E. You 'no" "hen to enter the mar'et and "hen to e)it. 2ut something is missing there... the strateg# doesn1t tell #ou ho& much money #ou have to ris' on one trade. You need to 'no" ho" man# minilots, lots or contracts to o%en ever# time. <t is the most im%ortant tas'. To ma'e things clear, let1s tal' about a gambler 5eorge and trader Tim. <t is im%ortant to understand the difference bet"een them, so read carefull#. 5eorge is trading because he has heard some"here that he can ma'e a large amount of mone#. .hen 5eorge is "inning, he sta#s calm and bets the same amount of mone# on ever# trade. .hen he feels rich, he is afraid of losing his hard earned mone#. 7o he bets a smaller amount of mone# on the ne)t trades. .hen he is losing, he becomes angr#. (e bets a larger amount of mone# to recover the losses 6uic'l#. 5eorge ris's less "hen he is "inning and ris's more "hen he is losing. Tim is a serious trader. (e ma'es Gust the o%%osite decisions. .hen he is "inning, he bets more. .hen he is losing, he bets less. <t sounds reall# strange and counterintuitive, so "h# is he doing this/ 2ecause his mone# management tells him so. (e doesn1t let his emotions to control him and his decisions. (e doesn1t %la# li'e ever#man. (e acts li'e a mone# ma'ing machine. Remember: The world$s top traders are trading counterintuitive They are behaving differently than 'normal( people They are making money consistently and having a nice living ! "inning strateg# !ccount result

5eorge is trading... 5eorge lost.

Tim is trading... Tim made a %rofit. ...the# both trade the same strateg#0 """.truemone#management.com ?

Chapter III: Achie-e e!ponential earnings and ne-er fail

III.1. Achie-e e!ponential earnings

<n the last t"o %aragra%hs "e "ill discuss the secret formula to achieve an e)%onential gro"th and never fail to Fero. This is the heart of this boo'. This is the "a# ho" trade the millionaires. a2 The basic money management is to ris a constant amount of money. It is recommended to choose +3 of initial account for beginners.

H)am%leA 2u# 52PJ879 at 2.0000 (o" big %osition should < o%en/ H)am%le targets Dgiven b# a strateg#EA <nitial !ccountA You "ant to ris' I@ (o" man# minilots should < o%en/ <f #ou o%en > minilotA one %i% K => I0 %i%s K =I0 You "ould ris' onl# =I0. The re"ard "ould be onl# =>00. one %i% K =I I0 %i%s K =2I0 You "ill ris' e)actl# =2I0. The re"ard "ill be =I00. That1s "hat #ou "anted. Minilots 4 5+3 Account2 6 57is in pips2 Ta'e %rofitA TP K 2.0>00 7to%lossA 7L K >.LLI0 =I000 =2I0 $e"ard is >00 %i%s. $is' is I0 %i%s.

You need to o%en I minilotsA !ns"erA 2u# I minilots of 52PJ879. The formula isA

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8!ample a2 <magine #ou are trading a strateg# "ith ?0@ "inning %ercentage and let the re"ard be t"o times more than the ris'. That means that #ou set u% #our %rofit target t"o times bigger than the sto%loss. Cor e)am%le, if #ou bet =>00, #ou "ill either get =200, or lose =>00. !nother e)am%leA if #ou bet =2I0, #ou "ill either get =I00, or lose =2I0. <magine #ou are a disci%lined trader starting "ith =I000 and ris'ing =2I0 on ever# single trade. The histor# of t"ent# trades should loo' li'e thisA Trade :o. > 2 , + I ? L >0 >> >2 >, >+ >I >? > >>L 20 !ccount =I000 =II00 =?000 =I I0 =?2I0 =?000 =?I00 = 000 =? I0 = 2I0 = 000 = I00 =-000 = I0 =-2I0 =-000 =-I00 =L000 =- I0 =L2I0 $is' =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 =2I0 .*:JL*7T .*: =I00 .*: =I00 L*7T =M2I0 .*: =I00 L*7T =M2I0 .*: =I00 .*: =I00 L*7T =M2I0 .*: =I00 L*7T =M2I0 .*: =I00 .*: =I00 L*7T =M2I0 .*: =I00 L*7T =M2I0 .*: =I00 .*: =I00 L*7T =M2I0 .*: =I00 L*7T =M2I0 !ccount =II00 =?000 =I I0 =?2I0 =?000 =?I00 = 000 =? I0 = 2I0 = 000 = I00 =-000 = I0 =-2I0 =-000 =-I00 =L000 =- I0 =L2I0 =L000

Your account reached =L000 so #ou earned =+000 after t"ent# trades. This 'ind of mone# management is "idel# used b# the disci%lined traders but it has t"o disadvantagesA <t "ill not ma'e #ou rich. You "ill earn a constant sum of mone# each month. That1s the same as being em%lo#ed. Nuiet ineffective. !fter ten consecutive losses, #ou "ill "i%e out a half of #our initial account D=2I00E. !fter t"ent# losses #ou "ill "i%e out the "hole account D=I000E.

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b2 Imagine you are trading the same strategy but using another money management. The ad-anced money management is to ris a constant percentage of your current account e-ery time. It is recommended to choose +3 for beginners. 8!ample b2 The histor# of t"ent# trades should loo' li'e thisA Trade :o. > 2 , + I ? L >0 >> >2 >, >+ >I >? > >>L 20 !ccount =I000 =II00 =?0I0 =I + .I =?,22.2I =?00?.>+ =??0?. I = 2? .+, =?L0+.0? = IL+.+? = 2>+. + = L,?.2> =- 2L.-, =-2L,.,+ =L>22.? =-???.I+ =LI,,.2 =>0+-?.I> =LL?2.>L =>0LI-.+> $is' I@ =2I0 =2 I =,02.I =2- .,=,>?.>> =,00.,> =,,0.,+ =,?,., =,+I.2 =, L. 2 =,?0. + =,L?.-> =+,?.+L =+>+.? =+I?.>, =+,,.,, =+ ?.?? =I2+.,, =+L-.>> =I+ .L2 .*:JL*7T .*: =I00 .*: =II0 L*7T =M,02.I .*: =I +. I L*7T =M,>?.>> .*: =?00.?> .*: =??0.?L*7T =M,?,., .*: =?L0.+> L*7T =M, L. 2 .*: = 2>.+ .*: = L,.?2 L*7T =M+,?.+L .*: =-2L.,, L*7T =M+I?.>, .*: =-??.?I .*: =LI,.,2 L*7T =MI2+.,, .*: =LL?.22 L*7T =MI+ .L2 !ccount =II00 =?0I0 =I + .I =?,22.2I =?00?.>+ =??0?. I = 2? .+, =?L0+.0? = IL+.+? = 2>+. + = L,?.2> =- 2L.-, =-2L,.,+ =L>22.? =-???.I+ =LI,,.2 =>0+-?.I> =LL?2.>L =>0LI-.+> =>0+>0.+L

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There are fe" advantagesA The first thing #ou have noticed, #ou have earned more. <n the %revious e)am%le =L000, no" =>0,+>0. You act li'e trader Tim. The smaller the account, the less #ou ris'. !s #our ca%ital gro"s, #ou can o%en larger %osition. This leads to an e)%onential gro"th. !s #our account reaches =>0,000, #ou ris' t"o times more than =2I0 Dbecause I@ of =>0000 K =I00E. !s #our account reaches =20,000, #ou ris' four times more Dbecause I@ of =20,000 K =>000E. <t is glad to see that ma'ing =>0000 dollars costs the same time as ma'ing =I000 dollars before. You can double #our mone# ever# fe" months. This is the "a# ho" ne" multimillionaires born. The %robabilit# of "i%ing out the "hole account tends to Fero. .e "ill cover this to%ic in the ne)t %aragra%h.

III.$. /e-er fail

!n e)am%le is more than >00 "ords. Trade :o. > 2 , + I ? L >0 >> >2 >, >+ >I >? > >>L 20 !ccount =I000 =+ I0 =+I>2.I =+2-?.-=+0 2.I, =,-?-.L =,? I.+? =,+L>.?L =,,> .> =,>I>.2I =2LL,.?=2-++ =2 0>.=2I??. > =2+,-., =2,>?.+? =2200.?, =20L0.? =>L-?.0 =>--?. $is' I@ =2I0 =2, .I =22I.?, =2>+.,+ =20,.?, =>L,.+I =>-,. => +.I=>?I.-? =>I .I? =>+L.?=>+2.2 =>,I.0L =>2-.,+ =>2>.L2 =>>I.-2 =>>0.0, =>0+.I, =LL., =L+.,+ .*:JL*7T L*7T =M2I0 L*7T =M2, .I L*7T =M22I.?, L*7T =M2>+.,+ L*7T =M20,.?, L*7T =M>L,.+I L*7T =M>-,. L*7T =M> +.IL*7T =M>?I.-? L*7T =M>I .I? L*7T =M>+L.?L*7T =M>+2.2 L*7T =M>,I.0L L*7T =M>2-.,+ L*7T =M>2>.L2 L*7T =M>>I.-2 L*7T =M>>0.0, L*7T =M>0+.I, L*7T =MLL., L*7T =ML+.,+ !ccount =+ I0 =+I>2.I =+2-?.-=+0 2.I, =,-?-.L =,? I.+? =,+L>.?L =,,> .> =,>I>.2I =2LL,.?=2-++ =2 0>.=2I??. > =2+,-., =2,>?.+? =2200.?, =20L0.? =>L-?.0 =>--?. => L2.+, >0

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Imagine the &orst possible situation. Ten or t"ent# consecutive losses in a ro". ! horrible bad luc' or %oor trading. Ten consecutive losses "ould %robabl# ruin ever# beginner. 2ut loo' "hat ha%%ened. !ctuall#, #ou have lost less than a half of #our account. Loo' "hat ha%%ened after t"ent# consecutive losses in a ro" Dan e)tremel# unli'el# coincidenceE. You are still alive0 <f #ou used the basic mone# management described in %aragra%h <<<.>. aE, #our account "ould definitel# fall to Fero Dbecause I@ ) 20 losses K >00@ accountE. The math formula holdsA

:o" #ou can easil# com%ute "hat ha%%ens after n consecutive losses if #ou start "ith account value &. H)am%lesA p K I, n K >0 p K I, n K 20 p K >0, n K >0

I000 O D> B 0.0IE>0 K I000 O 0.LI>0 K 2LL,.?I000 O D> B 0.0IE K I000 O 0.LI K > L2.+, I000 O D> B 0.>0E>0 K I000 O 0.L0>0 K > +,.,L
20 20

(ere "e got he same results as in the table above.

The last e)am%le sho"s us "hat ha%%ened after ten losses if #ou ris'ed >0@ instead of I@. You are still alive. 7ome ver# advanced traders ris' >0@ or far more. 7ince the# ris' more and get more, the# achieve amaFing results on the trading com%etitions De.g. .orld Cu% Cham%ionshi%PE. This is their secret. Remember: !uccessful traders are prepared for the worst possible situation Unsuccessful traders hope it will not happen

Licensed to

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>>

)appy Trading*

$is' disclaimerA Trading foreign e)change on margin carries a high level of ris', and ma# not be suitable for all investors. The high degree of leverage can "or' against #ou as "ell as for #ou. 2efore deciding to invest in foreign e)change #ou should carefull# consider #our investment obGectives, level of e)%erience, and ris' a%%etite. The %ossibilit# e)ists that #ou could sustain a loss of some or all of #our initial investment and therefore #ou should not invest mone# that #ou cannot afford to lose. CCTC $8LH +.+> M (#%othetical %erformance results have man# inherent limitations. :o re%resentation is being made that an# account "ill or is li'el# to achieve %rofits or losses similar to those sho"n. <n fact, there are fre6uentl# shar% differences bet"een h#%othetical %erformance results and the actual results subse6uentl# achieved b# an# %articular trading %rogram. *ne of the limitations of h#%othetical %erformance results is that the# are generall# %re%ared "ith the benefit of hindsight. <n addition, h#%othetical trading does not involve financial ris'. &ariables such as the abilit# to adhere to a %articular trading %rogram in s%ite of trading losses as "ell as maintaining ade6uate li6uidit# are material %oints "hich can adversel# affect actual real trading results.

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