CNBC Guest Blog

Published: Friday, 7 Aug 2009 | 4:34 PM ET

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Market coach Doug Hirschhorn, PhD, discusses how traders make money and, more importantly, manage to hold on to it in a volatile market.

The reality is, making money is not hard, it's keeping it that's a real challenge. And that's why many of the world's top traders maintain three beliefs when it comes to money management.

1. Their fear of losing money is greater than their fear of missing out.
2. They have a “build” rather than a “make” mentality. They seek to build days to make weeks, weeks to make months, and months to make years.
3. They Consistently stay within 10% of their high-water mark. In other words, as they're making more and more money and start to give some back, they quickly cut losses, never giving back more than 10 percent off their highs.

Anyone can master these techniques by looking at the risk of a situation to help determine the risk of a trade. There are low, medium and high risk situations. Risk can be anything from volatility in a certain market, to opportunities that do or do not exist, to the uncertainty around you.

In high risk situations, you want to use small positions. And in low-risk situations, that's when you want to size up and get big. If you use risk to determine position size, you're well on your way to trading like the top traders.

Stick to this process and you'll not only make money, but you will finally learn how to hold on to it!

Think better, invest smarter.

_________________________

Doug Hirschhorn is the chief executive officer of Edge Consulting, a firm specializing in “Peak Performance Coaching.”  He holds a Ph.D. in Psychology with a specialization in sport psychology, and has offices in New York and South Florida. His client list includes elite athletes as well as many of the largest banks, hedge funds and financial institutions in the world. Doug is presently at work on his new book, 8 Ways to Great (Putnam, 2010).

Have a question for Doug? You can reach him through his Web site, DrDoug.com

Disclaimer: Doug Hirschhorn's expertise is in the psychology of achieving peak performance. He is not a financial advisor and does not make trading or investment recommendations or provide trading or investment advice. He is an expert on the mental game. Although Doug Hirschhorn has a Ph.D. in Psychology with a specialization in sport psychology, he is not a licensed psychologist and does not provide therapeutic, clinical or counseling services.

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