Don’t Confuse Day/Week/Month Trading with Gambling!
This is a tough lesson to learn. I know. Trading can be very addictive.
Some experts don’t see much difference between day trading and gambling. “Day trading should be looked at as entertainment, much like playing blackjack in Las Vegas,” Johnson says. “And there is nothing wrong with entertainment.” But you have to keep your entertainment costs in check.
To me the the fun and excitement is in the research, learning and analysis of data. The challenges are in a couple of areas. Being right, yes. Making money – less so because I don’t have enough capital to be able to draw any meaningful income. Let’s take a look at that…
Last year I averaged more than ever, but I rode the bull stock market a little. So let’s say I discount the success by a lot and use a 5% a month return on the average. Which should be a reasonable expectation if you take it seriously and work it. Anything less and you are not doing it right.
$10,000 account trading CFDs x 5% = $500. Possible, but it would be much better to let the profits finance larger lots.
If you were lucky enough to have $100,000 in play, 5%=$5,000/month. If you succeed in doing this, great. If you do, you would probably take out 50% and let the balance grow your account.
Only trade with risk capital: capital you can afford to lose without it affecting your daily lifestyle,
One way to make sure you’re only trading with risk capital is to keep that money in a designated day-trading account. “Keep an account for day trading that is separate from the retirement assets that you are using to support your lifestyle. You can budget for capital additions to your trading account the same way you would budget for travel or hobbies or anything else you like to do
“Don’t day trade without a plan,” says Eric Sajdak, CIO and partner of Fox River Capital, an independent registered investment advisor in Appleton, Wis. “A plan can be as detailed as you want, from a detailed systematic day trading strategy to a simple set of rules that control allocation, but the key is to have a plan,”
Stops and Limits.
STOPS ARE ABSOLUTELY REQUIRED. Trailing stops are great.