Money management ways?

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<p id="isPasted">In trading, money management refers to the systematic processes used to decide how much of your total capital to risk on a single trade, how to protect it from large losses, and how to manage your profits.&nbsp;</p><p>Effective money management is often considered the foundation of long-term trading success, as it focuses on capital preservation—ensuring you stay in the market long enough for your strategy's "edge" to work.&nbsp;</p><p><strong>1. Position Sizing Models</strong></p><p>Position sizing determines the number of shares or contracts to buy based on your account size and risk appetite.&nbsp;</p><ul><li>The 1% or 2% Rule: This is the most popular conservative approach where you never risk more than 1–2% of your total account value on a single trade. For example, with a ₹1,00,000 account, a 1% risk limit means your maximum loss on a trade is capped at ₹1,000.</li><li>Fixed Fractional Method: You risk a fixed percentage of your current equity for every trade. This means your trade size automatically increases as your account grows and decreases during a "drawdown" (losing streak), creating a built-in "safety belt".</li><li>Fixed Ratio Method: Developed by Ryan Jones, this focuses on profit milestones (known as "delta"). You only increase your position size (e.g., from 1 lot to 2 lots) after you have earned a specific amount of accumulated profit. This is more aggressive for small accounts but more complex to track.</li><li>Kelly Criterion: A mathematical formula that calculates the "optimal" size of a trade based on your past win/loss ratio and average profit/loss. It aims to maximize long-term growth but can suggest very high risk levels, so many traders use a "Half-Kelly" to be safer.&nbsp;</li></ul><p><strong>2. Strategic Risk Controls</strong></p><ul><li>Stop-Loss and Take-Profit Orders: These are non-negotiable tools. A stop-loss automatically closes a losing trade at a pre-set level to prevent catastrophic losses. A take-profit locks in gains before the market potentially reverses.</li><li>Risk-to-Reward Ratio (R:R): Professional traders often only take trades with a minimum 1:2 ratio—meaning for every ₹1 they risk, they aim to make ₹2. This ensures you can remain profitable even if you win only 50% of your trades.</li><li>Asset Allocation (70/20/10 Rule): A broader portfolio strategy where 70% is kept in low-risk assets (like bonds), 20% in medium-risk (large-cap stocks), and only 10% in high-risk trades.</li><li>Maximum Daily/Weekly Drawdown Limits: Many disciplined traders (and prop firms) set a "line in the sand" (e.g., 3-5% of the account). If they lose this amount in a single day, they stop trading immediately to prevent emotional "revenge trading".&nbsp;</li></ul><p><strong>3. Psychological and Operational Rules</strong></p><ul><li>Separating Budgets: Always separate your trading capital from essential living expenses (rent, bills) to reduce emotional stress and avoid "panic" decisions.</li><li>Avoiding "Averaging Down": Professional traders strongly advise against adding to a losing position (often called a "Martingale" strategy) to lower your entry price, as this can lead to a total account wipeout if the trend continues against you.</li><li>Trailing Stops: As a trade moves in your favour, you can move your stop-loss level along with the price to protect your unrealised profits while still giving the trade room to grow.&nbsp;</li></ul>