One question the students in my seminars or trainings always ask each other is, “What’s your winning percentage?”

But out of all the statistics to measure performance, winning percentage doesn’t always tell the true measure of a trader.

I’ll show you what I’m talking about…

Trader A has a winning percentage on his trades of 70%, while Trader B has a 40% winning percentage on her trades. Which trader do you think is more successful?

I’m guessing most of you picked Trader A.

But what if I told you that Trader A has a return on his money of -25% and Trader B has a positive return of 30%? Trader A wins better than 50% of the time but loses money overall, while Trader B wins less than 50% of the time, but her trades are far more profitable.

Does that change your vote? I would hope so!

You see, a trader can win a large percentage of his or her trades, but what good does that do when the small number of losses outweigh the large number of winners?

So what’s the true measure of a trader’s success?

Last Tuesday, I told you that two of the most important things you can do as a trader is to build a plan for every trade and to stick with that plan through the end of the trade.

But before you can build an effective options trading plan, you have to make sure you have one thing in place.

Let me show you what I’m talking about…

Three Rules for Managing Your Money

Having strict money management rules is absolutely essential to your success as a trader.

It is nice to have a good win-loss record, but if your losers are bigger than your winners, you can still lose money overall. So how do you keep that from happening?

Through proper money management.

I am not your money manager, broker, or financial planner, so I won’t give you specific, personal financial advice. What I’m talking about here are some general rules for money management that have worked for me. If you like what I do and want to incorporate that into what you do, then PLEASE run these ideas by your professionals and determine what’s best for you and your money.