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In my last article, I wrote about the importance of having a profit target significant enough to over come the statistical disadvantage of the bid/ask spread and commissions. The next and most important el

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

ement of success in trading is the complete understanding of proper money management.

First, you must understand that a trading system generally gives some combination of buy/sell signals with target and

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

top loss levels or some combination thereof. Money management is a completely separate part of the system. It is not and does not have anything to do with the trading system. Money management is a SEPARATE

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

system in itself.

For those of you new to trading; Money Management refers to the decision as to how much of your trading capital to put at risk versus your trading capital.

Gambling Systems in

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

rading

Many new or beginning traders attempt to improve the results of their trading by using gambling based systems of doubling up after each losing trade or any of the many variations of these

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

systems. Without going into dramatic detail here just consider this situation (and it is not uncommon)

Account Size: $10,000 Money Management Plan: Risk 5% on initial trade and Double Up after Each Loss

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

rade Risk Loss End Balance

#1 $500 -$500 $9,500

#2 $1000 -$1000 $8,500

#3 $2000 -$2000 $6,500

#4 $4000 -$4000 $2,500

#5 Not Enough

After 4 consecutive loses this trader has lost 75% of the trading ca

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

pital and can not continue the system for lack of capital. You might argue that this trader will make money as long as they do not have more than 4 consecutive loses and this is true.

But study these Stat

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

stics:

Win Ratio ODDS of Losing 4 Consecutive Times

30% 1 in 5.71

40% 1 in 6.66

50% 1 in 8

60% 1 in 10

70% 1 in 13.3

If you give this some careful thought, you will easily see that over the course o

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

f a year and hundreds of trades the possibility of having four or more consecutive losing trades is nearly a certainty. My hope is by discussing this, it will discourage new traders from ever considering a

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

y of these doubling up systems. They are a certain road to eventually losing your trading account.

Simple and Effective Money Management for Small Accounts

The best and most effective me

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

hod of managing a small account is to make the first and most important concern to preserve capital. It is far more important to conserve capital than it is to swing for the fences. Many new traders make t

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

he mistake to leverage their accounts with far too much risk per trade in a feeble attempt to make the ridiculous gains touted by many outlandish systems on the market today.

I personally recommend the

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

following: First: Risk no more than 3-5% of the trading equity in each trade!

Second: Risk more only once profits are banked into the account

Third: Risk less per trade should your account lose value

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

.

Use the following Money Management formula in your trading regardless of your trading system:

(Beginning Balance X 3 to 5%) + (Profit Gained or Lost X 10%) = Max. Risk per Trade

Max. Risk per Trade /

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

top Loss Amount = Max. Shares or Contracts to Trade

Using this formula you will see that all of the objectives have been met:

1. Should your trading account drop below the beginning balance, you will qui

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ckly begin risking far less than the beginning 3 to 5% equity per trade.

2. As the account gains value, the formula allows for more risk and thus compounding gains.

3. Once gains are banked, but a losing

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

streak begins.. This formula immediately begins to reduce risk which conserves the gains in the account.

Summary

My hope is that this brief discussion of money management will spur you t

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

o give it serious study as this is EQUALLY as important as choosing a good positive expectancy trading system. Most new traders are so busy searching for the wholly grail that they completely neglect the m

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ney management aspect of their trading and thus doom themselves to eventually losing their trading capital. This is the primary reason that most new traders fail and must leave the trading game prematurely

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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For years Rick London was known on the Internet for his offbeat cartoons. Then he returned to college as an adult, learned business and technology and patented a new invention. He thought it would be easy. He was mistaken.

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