All Traders Must Remember To Do This - Timothy Sykes

All Traders Must Remember To Do This

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As you read about some amazing private jets in this post earlier today, you can have a LOT of fun once you have some money…trust me, I know.

But I wish more of you knew too — namely I want more trading challenges students to experience the sweet taste of success…that’s why I brought one of them who formerly worked in a cubicle but who has made nearly $200,000 with my strategy front row to the Miami Heat game the other night:

With the stock market hitting new highs, this is a great guest post from a new student who reminds traders to lock in some profits and enjoy life…don’t become a slave to your job, use your job to help you enjoy life more!

Here’s this solid guest post, thanks to N.P. for writing it:

May is upon and this is the time that people trim some positions due to an oft quoted phrase that one must go away in May. The sometimes lower volume and choppy price action during the summer months is great for traders. It gives them the opportunity to understand the stocks in a lull and get used to their rhythm and trade the ranges. Rather than going away traders can get very busy. However, that does not mean that a vacation is not earned. Traders can make money year round and you should always reward yourself with some down time and to enjoy your success.

Download the key points of this post as PDF.

Setting Some Aside to Enjoy Per Time Period

There are a lot of ways to set aside money. Some people used a fixed trading amount, and add or take out as much as needed to reach this fixed number. If you made $1 million but decide you only want a $100,000 account you would remove $900,000. You can adjust yearly, quarterly, monthly, or whatever interval feels right. Just try not to score a big win and then squander your winnings away, which is the gambler’s folly.

This is one of the toughest, but most intelligent strategies. The amount of money you use really changes how you trade. Someone who is used to trading with around $5000 might end up being completely lost if they suddenly had a $500,000 account to deal with. You cannot just scale up the percentages. For example, if you invested 5% in a certain trade you might not just continue with that. Sometimes that makes sense, but other times you just have to think in absolute terms.

Weak signals, but big rewards, might warrant a standard $5,000 investment, but back in the smaller days you could have gone with $1000 if only to make it worthwhile. That might not be the best example, but every seasoned trader knows that you cannot just throw $50,000 at every trade just because you used to use 10%. 10% back then meant $500. While the proportion stays the same, $50k is a ton of money and $500 is not even if you are talking about a $5,000 account.

Readjusting your account to a level you are comfortable with or just a step up is a good idea. For example, going from $10,000 to $20,000 instead of right to $50,000 or more. It is possible to have a banner year when you find a new strategy or service and it just clicks for you. It is not impossible to believe that you could have extremely high returns in one year. A lucky options bet on Netflix could have made untold riches off even a small investment. With the addition of leverage even buying and selling the stocks themselves can have an impact.

Taking everything above a certain amount out of your trading account is a great way to bank on your good fortune. You can take some of that and treat yourself and save the rest. One of the reasons you do not just want to roll all that back into trading, is that if you are a new trader you lack consistency. You had a good year, but now try for another great year. If you have consistency then you should increase what you trade with or your account is so large adding more is pointless. Remember, trading is an active process and there are only so many positions you could really manage at any one time.

Take a Piece of Every Winning Trade

Bad runs happen, and those can be the worst times. Making money like a champion is fun, who needs a break from that. If you wait till the end of the year to take something for yourself in order to go have fun, then you could be hit by a run of bad luck near the end and not have much for yourself. This is not for a situation of catastrophic losses, but just those annoying months where the market barely moves and makes no sense. Times like those it would be nice to already have money set aside to go take a vacation or a weekend to unwind. You tend to know when it is that time. If that money is already out of your trading account you feel better about using it. It’s hard to take out money if you’ve been posting losses.

You can set aside a certain percentage of your winning trades. The most common way is to take a percentage of just the profit from winning trades. It’ll slow the growth of your account, but trading can be thankless if you have nothing to show for it at the end. Putting some away from every trade can give you something to use guilt-free when you are in a mood. The remaining profits will hopefully patch the holes from future losses.

Unlike the method above, you keep the money in your trading account, except whatever you decide you want to save specifically. That is, your account can just grow and grow. That seems fairly common, but it actually matters how big your trading account it. You can make mistakes you normally wouldn’t if you are forced to deal with a new account size, smaller or larger.

Posted in Basics

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one comment

Timothy Sykes

Hey Everyone,

As many of you already know I grew up in a middle class family and didn't have many luxuries. But through trading I was able to change my circumstances --not just for me -- but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!

Which is why I've launched my millionaire challenge. Iā€™m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.

So when you get a chance make sure you check it out.

PS: Don't forget to check out my free Penny Stock Guide, it will teach you everything you need to know about trading. :)

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