MONEY MANAGEMENT TIP #2: DETERMINE YOUR TRADING BANKROLL!
DETERMINE YOUR TRADING BANKROLL: Set up your trading account so that you can decide on the proper chip size to play with. The size and number of your bets should always be in direct proportion to the depth of your pockets.
Set up your trading account so that you can decide on the proper chip size to play with. The size and number of your bets should always be in direct proportion to the depth of your pockets. For example, let’s say that you want to take a conservative approach to the market and have $100,000 to trade that is not part of your security assets. First, you set aside 80% or $80,000 in an account designated as growth funds to be invested for the intermediate-term time cycle in no-load index mutual funds. Then you put 20% or $20,000 in a separate play-money account for trading the short-term. With your short-term trading account, you’ll want roughly half of that amount available for immediate play and the other half in reserve. This equates to having $10,000 of your tactical funds available to play Wall Street Craps at any given moment and backing it up with $10,000 in reserve. This simple example will keep your money under control, limit your exposure to immediate risk, and lower the degree of fear that you’ll encounter when playing this challenging game as an amateur.
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“For the trader or investor, discipline means to exercise good and prudent money management and risk management. Sun Tzu said that the general who follows these principles will be victorious, and so shall you.”
Dean Lundell ~ Author of Sun Tzu’s Art of War For Traders And Investors (1997)