What is capital management? Why must learn it?

Capital management is a popular concept in the financial industry in particular and the economy in general. Currently, there are many definitions of it, all of them are true because each aspect will have an accurate and understandable view of capital management in that situation.

Business capital management and investment capital management

When you are a business owner, capital management is managing business capital, you need to know how to operate your company’s capital, business capital management is a financial strategy to ensure maximum efficiency in the company’s cash flow.

Its purpose is for the business to have the means to meet daily expenses, as well as short-term financial obligations. And long-term capital allocation strategies.

In the investment aspect, the concept of capital management will be more detailed with the name of investment capital management such as stock, forex, money 4.0 … every trader tries to maximize profits. profit, while also minimizing the risk. That is risk/reward ratio is really reasonable and maintains it for as long as possible. For example, when trading money 4.0, in 10 of your trading orders, there must be at least 6 winning orders, and the rest 4 losing orders, you still have profit). Or at least you must comply with the law of preserving the balance 5 wins 5 losses.

Why must learn capital management?

Managing business capital is very important to a business, ineffective business management will lead to many problems that business owners do not expect and respond to. Typically, some companies have no control over the exact cash-out and in time. For example, when creating a product, you have to know if the revenue is flowing to your company at the right time and in line with the company’s operation. Since there will come a time when the business will need to deal with expenses such as salaries, fees for new materials, liabilities, … then the working capital reserve of the company will not be enough. to solve problems.

Effective business capital management means you have to control the company’s 2-way cash flow, thereby having a reasonably detailed allocation plan, of course, there will be no problems, and if there are, in your plan.

Business owners need to maintain a good ratio of the company’s assets and liabilities.

Effective business capital management ensures that the business can easily handle its costs and liabilities without any core risks.

Most of the people who say that each way of trading will have a different method of capital management. I do not deny this, however, in my opinion, the management of investment capital is to ensure these 2 main factors and 2 factors apply to any trading method:

• Preserving Balance (capital)
• Protect your profits and control “Fear and Greed”

Preserving Balance: Here I want to mention that the stop loss and take profit are reasonable and consider this ratio must be appropriate. I used another example with 10 trades if you lose 6 times in a row but if you only win 4 times, you can break even to profit.

Protect your profits and control: “Fear and Greed” when a trade is profitable (running orders), what you need to do is not look at the running order but sit on your lap, but move your stop loss. you get closer to the entry point, which helps you minimize your losses or take some profit. Control “Fear and Greed”.