Don't Override Your Capital Management Plan
As you may have heard me waffle on, Capital Management is the most important component of your trading methodology. If you don't have any at all then well forget it, your account will be dry in no time at all. But in the same way if you don't respect it, you can have some major 'whipsaw holes' in your capital.
I think it's time we actually took this 'Capital Management Plan' a step further as there's two important parts to managing your capital.
No. 1 Stick to Your Capital Management Plan
This is a simple process. Look at how much cash you have. Revise your draw-up and drawdown targets from the FX Pro Trader Course '4 consecutive loss rule' and stick to it!
This should be a systematic approach and one not that hard to follow.
For some weird reason as soon as anyone starts having a run of winners this plan goes out the window and it's on for young and old. "I'll make $100K this week, from my $5K account"..... ummm no that's not going to happen.
Next thing you know you take a few on the chin and you've got a gaping hole in your capital. Doh!
No.2 Have Honest Achievable Targets (Most traders don't!)
So you have your cash in your account. Now let's wind back the clock just a touch. Ask yourself ... 'how much cash do you want to make each month'?
If your answer is $10,000 and you only have a $5,000 trading account well then you need to re-examine your numbers.
Start with this: If you nail 1 trade a week and take out 75 pips.... then that's a potential 7.5% return.
If you have 4 good trades in a month then that's a 30% return (4 x 7.5%). To be realistic let's say you have 4 losing trades of 25 pips (4 x 2.5% = 10%), then that still leaves you with a 20% return for the month. That's pretty damn fine in any investor's handbook!
Monthly return: 20% of $5,000 = $1,000 (account balance now $6,000)
The problem lies with trader's expectations. They usually aren't realistic. Actually let me rephrase that. They are until they start making money!
Most traders I speak to want to make $5,000 a month, invariably with a $5,000 trading account.
I'm sorry to say it guys, but it's just not going to happen. You can of course make that sort of cash sure, but to sustain it you have to push the boundaries of risk management and that's because to achieve this goal you are going to have to put your account under a huge amount of pressure & risk.
You will have to trade with maximum leverage on each trade and if one trade goes wrong it's all over. This is not the way to do it.
If you want to make more money simply put more cash in your account, it's that simple. If you don't have it available, well then start with what you do have and stick to it.
Let's break it down to make it easier to comprehend
If you've got a $5,000 trading account then a 20% return is ambitious but achievable.
As most of you know by now it's the market conditions that mainly determine when the cash will come in and that's why it's often better to spread your goals over a 6/12 month time period.
That means making $1,000 per month. To do this you need to make $250 per week.
$250 Bucks = 25 pips with 1 lot OR 50 pips with 0.5 lot OR 100 pips with 0.25 lot
Don't overshoot it, over think it, or over trade it ..... and make sure you take the easiest route.
Plan the Trade, Trade the Plan
Now you have your capital management squared away you can focus solely on the trading opportunities. Trading funnily enough will become easier once you have clear achievable goals in place. Remember you have a solid capital management plan that is going to provide the foundations for long term success.
We'll guide you through the market with our daily market insight and analysis to build your knowledge and experience. All you need to do is stick to the plan.
So please make sure your goals match up with your account size. If they don't then you're going to have some serious issues at some point, believe me you will... everyone does!
Good luck and successful trading!
As you may have heard me waffle on, Capital Management is the most important component of your trading methodology. If you don't have any at all then well forget it, your account will be dry in no time at all. But in the same way if you don't respect it, you can have some major 'whipsaw holes' in your capital.
I think it's time we actually took this 'Capital Management Plan' a step further as there's two important parts to managing your capital.
No. 1 Stick to Your Capital Management Plan
This is a simple process. Look at how much cash you have. Revise your draw-up and drawdown targets from the FX Pro Trader Course '4 consecutive loss rule' and stick to it!
This should be a systematic approach and one not that hard to follow.
For some weird reason as soon as anyone starts having a run of winners this plan goes out the window and it's on for young and old. "I'll make $100K this week, from my $5K account"..... ummm no that's not going to happen.
Next thing you know you take a few on the chin and you've got a gaping hole in your capital. Doh!
No.2 Have Honest Achievable Targets (Most traders don't!)
So you have your cash in your account. Now let's wind back the clock just a touch. Ask yourself ... 'how much cash do you want to make each month'?
If your answer is $10,000 and you only have a $5,000 trading account well then you need to re-examine your numbers.
Start with this: If you nail 1 trade a week and take out 75 pips.... then that's a potential 7.5% return.
If you have 4 good trades in a month then that's a 30% return (4 x 7.5%). To be realistic let's say you have 4 losing trades of 25 pips (4 x 2.5% = 10%), then that still leaves you with a 20% return for the month. That's pretty damn fine in any investor's handbook!
Monthly return: 20% of $5,000 = $1,000 (account balance now $6,000)
The problem lies with trader's expectations. They usually aren't realistic. Actually let me rephrase that. They are until they start making money!
Most traders I speak to want to make $5,000 a month, invariably with a $5,000 trading account.
I'm sorry to say it guys, but it's just not going to happen. You can of course make that sort of cash sure, but to sustain it you have to push the boundaries of risk management and that's because to achieve this goal you are going to have to put your account under a huge amount of pressure & risk.
You will have to trade with maximum leverage on each trade and if one trade goes wrong it's all over. This is not the way to do it.
If you want to make more money simply put more cash in your account, it's that simple. If you don't have it available, well then start with what you do have and stick to it.
Let's break it down to make it easier to comprehend
If you've got a $5,000 trading account then a 20% return is ambitious but achievable.
As most of you know by now it's the market conditions that mainly determine when the cash will come in and that's why it's often better to spread your goals over a 6/12 month time period.
That means making $1,000 per month. To do this you need to make $250 per week.
$250 Bucks = 25 pips with 1 lot OR 50 pips with 0.5 lot OR 100 pips with 0.25 lot
Don't overshoot it, over think it, or over trade it ..... and make sure you take the easiest route.
Plan the Trade, Trade the Plan
Now you have your capital management squared away you can focus solely on the trading opportunities. Trading funnily enough will become easier once you have clear achievable goals in place. Remember you have a solid capital management plan that is going to provide the foundations for long term success.
We'll guide you through the market with our daily market insight and analysis to build your knowledge and experience. All you need to do is stick to the plan.
So please make sure your goals match up with your account size. If they don't then you're going to have some serious issues at some point, believe me you will... everyone does!
Good luck and successful trading!
