Risk control and money management in futures trading or investing involves specialized techniques combined with your own personal judgment. Failure to adhere to a sound money management program can leave you subject to a deadly "Risk-of-Ruin" exposure and most probable equity bust.

Calculating Proper "Trade Size"
If you are trading the exact same number of shares or contracts on every trade, then you may not be calculating the proper "Trade Size" for your own personal risk tolerance. "Trade Size" can vary from trade to trade because your entries, stops, and account size are constantly changing variables.

You Must Believe You Need It
In order to implement a money management program to help reduce your risk exposure, the first step is for you to fully believe that you need this sort of program. Usually this belief comes from a few large losses that have caused the kind of psychological pain that makes you want to change. This kind of experience can enable you to see how improper "Trade Size" and lack of discipline can sabotage your trading results.

How Much Can I Afford To Lose On This Trade?
Novice traders tend to focus on the trade outcome as only winning and therefore do not think about risk. Professional traders focus on the risk and take the trade based on their proven trading system indicating a favorable outcome. Thus, the psychology behind "Trade Size" begins when you believe and acknowledge that each trade's outcome is unknown when entering the trade. Believing this makes you ask yourself, "how much can I afford to lose on this trade?"

Once you've answered this question (based on your money management rules), you'll either want to adjust your "Trade Size" or tighten your stop-loss before entering the trade. In most situations, the best method is to adjust your "Trade Size" and set your stop-loss based on market dynamics.

Draw-Down
During "Draw-Down" periods, risk control becomes very important and since experienced traders test their trading systems, they have an idea of how many consecutive losses in a row can occur. Taking this information into account, allows you to further determine the appropriate risk percentage to allow for each trade.

Conclusion
It is important to realize that you must be aware of the risks in trading the financial markets and live in full awareness. Let your positive beliefs lead you to take the action necessary to succeed.

By acknowledging the good and the bad (the reality) and by fine tuning your money management system you are on your way to greater prosperity.