Top 5 Ways to Handle Your Money when Trading
OK guys we have a had a few requests about how to handle money and profits, so I am going to go through a few of the techniques I use or have used in the past during my trading journey.
Why is this so important?
At the end of the day sooner or later the money made or lost is going to be the number one key factor in your trading! Financial pressure is huge for most of us in this current climate and any way of easing that is duly welcomed with open arms. I hope some of these tips help you.
1. Save Money -
I am still amazed how many people don't save any money each month. Sure for some they simply have none to save but for most working people it is lifestyle and expenditure that means they don't save any money. For traders desperate to build a bankroll, saving money can become an afterthought but it is important to put money aside each month that does not go into the bankroll. Think of it as an insurance policy, if things go wrong in your trading don't you want to have as much money as you can to back you up for a while? Amounts can vary from month to month and there may be times it is not possible but I tell you what, it doesn't half ease the pressure of trading when you are saving regularly, knowing one or two bad months won't lead to financial disaster.
2. Take a Profit -
Many new traders want to build a big bankroll but it is also important to withdraw some of the profits each month if anything for peace of mind. Ryan advises taking 50% of the profit out and compounding the rest and this is a great idea. It is nice to know you have profit in the bank because when a bad day comes along, you still are in a good position!
3. Compounding is the best way build -
Investing your profit (50% advised) back into your bankroll each month is a great thing if you are looking to build a bankroll. It is a far greater alternative that putting your own outside money into your bankroll. Taking 5-10k you made elsewhere may feel OK at the time but if you lose a chunk of it you will be kicking yourself for not starting small and building over time.
4. Offset Losses into Savings -
This is a personal one for me and may seem silly to some but it works for me at least. If I have a bad loss due to my stupid decision then I will often invest the same amount of money into my savings. As mad as it may sound it feels so good to put that money into savings and ensure that although technically the money is still lost, you have increased your insurance level. Also, as this will diminish your cashflow over time if you keep doing it, it helps you learn not to chase.
5. Take a break from Money -
Every now and then it is good to take a day or two off worrying about financial pressure. Now I am not saying take a day off to spend money but just try and enjoy the outside world without worrying about how you will make it through the next few months. This is not easy at all and I am one of the worst people for this no matter how well I am doing! The reality is though that worrying is energy that is better spent enjoying the company of people and living your life. Trading is isolating enough but we can't let money take it's vice like grip on us, believe it or not there are more important things in life like health and loved ones!