Money Management & My Trading Secrets

Contrary to what some may believe, there is no “perfect amount” to start your trading capital with although the more you have, the easier it is because there are some fixed costs involved with trading.

You’ll tend to find that it’s the brokerage you need to be aware of as the vast majority of brokers charge a set fee. Obviously, the more capital you start with, the more affordable the fee will be for you.

To make this a little clearer, let’s take an example where two traders wish to open a trade, using the same broker who charges a fee of 0 per trade. Trader number one has a fund of 00 while trader number two has a fund of ,000. In this case, the trader with 00 will need to make a win of 10% just to break even while the trader with ,000 only needs to make 1% in order to break even.

Essentially, all I’m saying is that those who start out with a small fund are at a slight disadvantage.

Likewise, the size of your float is going to have a direct impact on which stock trading system you use.

If you’re starting out with a relatively small fund then I’d advise you to look at a long term trading system rather than a short term system like day-trading. Of course, while there are many reasons for me saying this, the most important benefit is that a long term system can be managed with great success even while you continue working in your regular job. As you gain experience and become more confident, then yes, start experimenting with a short term system.

I know that many people start saving money before they actually start trading and of course there’s nothing wrong with planning ahead. On the other hand, there are those who max out their credit cards in order to start trading and for the most part, I certainly don’t advise this course of action. Sure, if you’ve got the necessary trading experience then yes, you can loan money from the bank, just as many others do in order to start a regular business. Remember though, the more money you invest, the bigger the results will be. Win and you win big, but if you loose, you’ll also loose big. The best advice I can give, would be that you start out slowly rather than risking your life savings only to loose everything.

As Don Miller mentions in Trading Markets World Meets the Traders, new traders should focus on good trading rather than making money and for this reason, funding your trading with credit cards is a bad idea. Why? Because you’ll end up spending most of your time worrying about the repayments and far too little time worry about good trading. In fact, unless you have enough money set aside, you shouldn’t even consider giving up your regular job and when I say “enough money”, I mean it should be enough to support you for at least two years.

Take a bit of advice from the professionals and start trading part-time only. This way you’ll be gaining some experience and at the same time you’ll start to see some returns coming in.

Short-term trading systems and long-term trading systems:

Short-term systems where trades are typically from one to thirty days require a great amount of expertise and experience, not to mention the fact that they’re extremely time consuming as well. In this case, traders seek to accomplish a high number of wins by taking part in more trades.

Long-term systems require considerably less skill that short-term systems. For the most part, those involved in a long-term system focus less on multiple trades and frequent wins, but more on capital growth instead.

There are numerous factors which determine how much capital you start with such as, how much money you have, how much risk you’re willing to take, and of course, what tools you decide to use. The fact is, there simply isn’t an ideal figure suitable for everyone. The most important thing is, you need to keep your trading capital set up as a separate business once you’ve decided how much you want to start with. This also acts as a barrier against tapping into your profits as you go along.

As a personal bit of advice, I would suggest you have at least ,000 to start off with, and remember, your trading venture is just like any regular business so please treat it that way.