Capital management is one of those behind-the-scenes parts of trading that doesn’t get much hype—but quietly determines whether you last a mere week or build a sustainable, profitable trading career.
Most new traders obsess over entries, indicators, and finding “the perfect setup.” That stuff matters, sure—but what you do to protect your money will also have a huge impact on whether you become long-term profitable or not. Capital management is about protecting your trading account, staying consistent, and using your money wisely so you don’t blow it all when the market turns against you.
Capital management should be front and center of your trading routine, and include firm rules for how you control the size of your trades, your overall risk, and the balance of your trading account.
Examples of points that you should decide in advance and not in the heat of the moment:
It is about preserving enough capital to stay in the game, and about finding the best ways to use your capital in an efficient manner. Smart capital management helps you grow your account steadily.
This is the golden rule: never risk a large chunk of your account on any single trade. One wrong move, and you will be struggling to stay in the game. Experienced traders usually risk a maximum of 2% of their total account per trade, and some put the ceiling even lower; at 1% or 1.5%.
It may sound small, but it gives you breathing room. Your account can survive losing streaks, and it will also help keep your emotions in check. Risking 10% or 20% might feel like you’ll get rich faster—but it’s also how people go broke in a few days.
On sufficiently liquid markets, you can use stop-loss orders to limit risk.
Examples:
Using stop-loss orders become more risky on markets that are not very liquid, or where liquidity is not stable. When there is not enough liquidity, your stop-loss order can be triggered, but your position will not find a buyer at that price point, and the price will drop even further before the position is closed. The same is true if your trading platform is slow.
Do not trick yourself by trying to find loopholes. Do not open several different 2% positions that are essentially exposing you to the same risk.
We know it is tempting, especially when a trade looks like a sure thing. But capital management means avoiding all-or-nothing bets. Markets are unpredictable. Even the best setups fail. Going all-in is gambling, not trading. Smart traders stay in the game by always keeping a chunk of capital out of the market—ready for better opportunities, or just there as protection if something unexpected happens.
Capital management isn’t just about the number of trades—it’s about the size of those trades. Too small, and you’re not growing. Too big, and you’re putting your account at risk.
Your position size should depend on:
There are times when it makes sense to scale back and play it more safe than you normally do. Maybe the market’s choppy, or your recent trades haven’t been going well (increasing the risk of emotional trading). Capital management includes knowing when to show restraint.
Trading smaller—or not at all—during uncertain times is just as important as being active in the market when everything lines up. This is how you protect profits, avoid overtrading, and keep your confidence intact.
Not every dollar in your trading account has to be active. In fact, having some of your capital not in any trade is better. Sometimes, the markets go crazy, and a single event impacts all your open positions in a detrimental way. You need to have enough money out of the market to keep your account afloat when something like that happens.
In addition to always having some of your trading capital away from the market, you should ideally also have a bit squirreled away that you only use when you find something especially appealing – something that truly fits your trading strategy to a tee.
It is tempting to always have as much money as possible out there in open positions, since it makes us feel we make the money work as maximum capacity. However, always having your money tied up in okay deals can prevent you from acting quickly when you spot an opportunity that is considerably more than okay.
By having some money set aside, you can act on great opportunities, and – maybe even more importantly – you can avoid forcing trades just because “your money’s sitting there” and you feel uncomfortable about it.
Note: We do not advocate jumping in like crazy because something looks very promising. The trades you jump on should be the ones that really fits your trading strategy, and you should still stick to your risk-management plan.
It is important to pick a trading platform that will provide you with the risk management tools you need, e.g. when it comes to order types. Learn about the different order types, decide which ones that are suitable for your trading strategy and risk-management routines, and make sure you pick a trading platform where all of them are available and easy to use.
Examples of market orders:
You can find a broker that offer you the features you want and that is regulated by a regulator you trust by visiting Brokerlistings. Brokerlistings is a website designed by make it quick and easy to compare brokers.
As your account grows, it’s natural to increase your trade size—but do it slowly. Don’t suddenly become more aggressive just because you had a few good weeks. Stick to your risk percentage and scale up as your balance increases. This way, you grow your capital without suddenly taking on more risk than your account can handle. You have a good thing going. Do not let a lack of patience ruin it.
Trusting someone else to manage your capital is a big move. Whether you’re an investor looking to grow wealth passively or a trader with more money than time, choosing a capital manager isn’t something you rush. You’re handing over control of your money—so you need to know exactly who you’re dealing with, what they do, and how they do it. A good capital manager can help grow your wealth steadily while protecting you from unnecessary risk. A bad one can burn through your capital faster than the market itself, and (in some jurisdictions), if you enter into the wrong kind of contract, they can even put you in the red through leveraged trades in your name.
Choosing a capital manager isn’t about finding someone with the flashiest numbers. It’s about choosing someone who aligns with your goals, communicates clearly, respects your risk tolerance, and earns your trust through transparency—not hype. Don’t rush the process. Ask questions, review the data, and make sure they’re not just managing money—they’re managing it for you, not just with you. When you get the right match, a good capital manager can take a huge weight off your shoulders and help your money grow in a way that actually fits your life.
Below, we will take a look at a few points that are important to keep in mind when you are considering hiring a capital manager.
A capital manager (sometimes called a portfolio manager or investment manager) is someone who manages money, e.g. on behalf of individuals, family trusts, or institutions. They build and maintain portfolios, decide where and when to allocate funds, and adjust positions based on performance, strategy, and risk tolerance. They might work for a firm, a hedge fund, a private office—or independently. Some manage long-term investments, others specialize in active trading strategies.
Before anything else, get clear on what kind of management you’re looking for:
Different managers offer different styles. Don’t try to fit into their strategy—find one that fits yours.
Anyone can claim to be a capital manager. That doesn’t mean they’re qualified or trustworthy. Ask for verifiable credentials, licenses, and regulatory affiliations. In the U.S., this might include SEC registration or being listed with FINRA. In the UK, it could be FCA registration. The financial authority in your country can provide you with more information about which type of registration and licensing that is required or recommended. They will also be able to confirm if the capital manager is registered / licensed / supervised by them.
Next step is to look at the capital manager´s track record. Ask how they’ve performed—not just in bull markets, but during downturns. A manager who only thrives when the market is booming may not know how to protect capital during a crash. And don’t just focus on returns. Look at how they achieved those returns. Was it with consistent growth and controlled risk? Or with high-risk bets that paid off a few times?
If possible, try to verify the capital manager´s claims using independent sources.
Your capital manager should tailor their approach to your objectives—not just apply a one-size-fits-all strategy. Whether you’re looking for steady income, aggressive growth, or capital preservation, the manager should be able to explain how their approach supports your goals. If they can’t clearly explain their strategy in plain language—or they dodge questions—that’s a red flag.
Examples of questions to ask:
You should always know what’s happening with your money. A good capital manager offers regular performance updates, access to reports, and open communication. They should be able to tell you things such as:
If you’re not getting full visibility into how your capital is being handled, that’s not someone you want managing your money.
There are usually two ways capital managers get paid: a management fee (a flat percentage of assets under management) and/or performance fees (a cut of profits above a certain threshold).
Make sure the fees are reasonable for the service you’re getting. A typical management fee ranges from 1% to 2% annually. Some managers charge performance fees of 10–20% of profits, often with a hurdle rate or high-water mark.
Always ask:
A good capital manager should be completely upfront about what you’re paying, why, and when.
If you’re investing in stocks, don’t hire someone who only has experience in forex. If you’re looking for cryptocurrency exposure, don’t go with a manager who clearly isn’t fluent in that space. You want someone who understands the markets you care about—and can prove it. Ask what kind of assets they usually manage, what platforms or tools they use, and how they stay informed. A skilled manager should be able to explain what’s happening in their market without hiding behind jargon.
You’re giving this person access to your hard-earned money. If something feels off—if they’re dodging questions, being overly vague, or selling you with big promises—walk away. Trust your gut. A real professional is direct, honest, and never rushes you.
They should also be available to answer questions, provide updates, and explain results—especially when things aren’t going well. Communication during down periods is where trust is built.
If you sense that you and your portfolio is not important to this capital manager, trust your gut feeling. Sometimes, clients are so eager to utilize a prestigious capital manager that they fail to realize that they are treated as third-class clients and not given proper consideration. In some cases, it is better to be an important client for a less prestigious firm than a unimportant client for a fancy firm.
When it comes to growing your money, you’ve got two main options: hand it off to a professional or take the wheel yourself. Both routes can lead to solid results—but they’re built for very different types of people, mindsets, and risk tolerances.
So should you use a capital manager or manage your own investments? Below, we will take a look at the pros and cons of both choices.
If you like control, want to learn the ins and outs of the market, and are willing to put in the time and energy, investing on your own might be the way to go. You choose what to buy, when to sell, how much to risk, and where your money goes. Whether you’re swing trading stocks, holding cryptocurrency long-term, or pouring your money into index funds—you’re calling the shots.
This path can be incredibly rewarding. You get to build your own strategy, learn through experience, and potentially avoid management fees that eat into your profits. You will learn fast, and nothing teaches discipline and risk control like seeing your own money on the line. But it requires consistency, emotional control, and a solid plan—not just reacting to the latest trend on social media.
Who it’s best for:
Hiring a capital manager means outsourcing all the heavy lifting. They handle the research, strategy, execution, and portfolio balancing. Your job? Monitor performance, ask questions when needed, and let them do what they’re good at.
Using a capital manager is common among those who have capital to invest, but not the time, energy or interest to actively manage it. Maybe you’ve got a demanding job or family responsibilities Maybe trading stresses you out. Maybe you just want consistent, professional management and less emotional involvement.
The trade-off is cost and loss of control. Most capital managers charge a management fee (often 1–2%) and sometimes a performance fee. That adds up, especially over time. You will also hand over your money to be managed by someone else, thus giving up the day-to-day control.
A solid capital manager will tailor a strategy around your goals, keep you updated, manage risk carefully, and protect your portfolio during rough markets. A bad one? They’ll charge you as they squander your money.
Who it’s best for:
You don’t have to go 100% one way or the other. Plenty of people use both approaches. Maybe you manage your own swing trading account while a professional manages your retirement portfolio. Or maybe you hire a manager to handle the bulk of your funds, but keep a smaller personal account to stay sharp and engaged with the market. It’s your money—you get to build the setup that works for you.
Using a capital manager gives you structure, experience, and professional oversight—but it costs money and removes control. Investing on your own gives you flexibility, ownership, and the chance to build real skill—but it takes time, effort, and emotional discipline
Either way, the key is clarity. Know what you want, know what you’re good at, and build a plan that fits you.
The term money manager is typically used for an investment manager who specializes in advisory or discretionary management on behalf of a private investor, often within the context of private banking.
Compared to a money manager, a so-called wealth manager tend to take a more holistic view of the client. A wealth manager will typically provide investment advisory services and financial management to high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals and families. How to protect wealth and pass wealth from generation to generation is often a key aspect of wealth management.
