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Money management is used in Investment management and deals with the question of how much risk a decision maker should take in situations where uncertainty is present. More precisely what percentage or what part of the decision maker's wealth should be put into risk in order to maximize the decision maker's utility function.

Money management can mean gaining greater control over outgoings and incomings, both in personal and business perspective. Greater money management can be achieved by establishing budgets and analyzing costs and income etc.

In a sense, every successful trader employs money management principles in futures trading, even if only unconsciously. The goal is to facilitate a more conscious and rigorous adoption of these principles in everyday trading. This outlines the money management process in terms of market selection, exposure control, trade-specific risk assessment. In doing so, it gives the trader a broad view of trading.
A signal to buy or sell a commodity may be generated by a technical or chart-based study of historical data. Fundamental analysis, or a study of demand and supply forces influencing the price of a commodity, could be used to generate trading signals. Important as signal generation is. First the trader must decide whether or not to process with the signal. This is a particularly serious problem when two or more commodities are vying for limited funds in the account. Next, for every signal accepted, the trader must decide on the fraction of the trading capital that he or she is willing to risk.

The goal is to maximize the profits while protecting the bankroll against undue loss and overexposure, to ensure participation in future major moves. An obvious choice is to risk a fixed dollar amount every time. More simply, the trader might elect to trade an equal number of contracts of every commodity traded. However, the resulting allocation of capital is likely to be suboptimal.
For each signal pursued, the trader must determine the price that unequivocally confirms that the trade is not measuring up to expectations. This price is known as Stop-loss price. The dollar value of the difference between the entry price and the stop price define the maximum permissible risk per contract. This risk capital allocated to the trade divided by the maximum permissible risk per contract determines the number of contracts to be traded. Money management encompasses the following steps:

• Ranking available opportunities against an objective yardstick of desirability.
• Deciding on the fraction of capital to be exposed to trading at any given time.
• Allocating risk capital across opportunities.
• Assessing the permissible level of loss each opportunity accepted for trading.
• Deciding on the number of contracts of a commodity to be traded.