Trading can be a very profitable source of generating money, but as I said in previous blogs that it can be very risky too. Recently few people from my office have started trading with me and they have got a return of 30% in just a few days which is enormous
However, if your primary source of income is trading then you need to manage your finances very well. Below are some questions which I think every trader should be able to answer
- How much money is enough
- How much profit should I book
- How many trades should I open
- How much should I withdraw from my trading account
- How much should I keep in my trading account
- What are my monthly expenses
- Where should I save and invest money
Every time a trader opens a trade he always asks the above questions to himself, in simple terms you can call it as Money Management & Risk Management.
Let’s start with a few things you should always plan before start trading
What is your goal?
If you are starting with a $1000 and you have planned to get a 20% return every month, so your Goal is to make $200 dollars every month. Make sure you have a plan to reach your goal and DO NOT OVER-TRADE
Plan your profit
When few of my colleagues started trading last week they asked me a question. Why did we close this trade so early, it has gone up a lot.? It is very important to stick to your analysis even though you see large price movement do not become greedy and risk your trades, Take your profit whatever you have planned and close the trade
Withdraw your profit
My good friend at work told me, that he has converted his $2000 account to $14000 account and lost all his money in just a day. I told everyone in my trading group that trading is very risky but u can avoid that risk by taking proper and very simple measures. Things that a novice trader should do to protect his account from market crashes
- withdraw your profits so that you do not have a large capital to open more trades
- whenever you lose more than 50% of the capital take a break from trading. you need a fresh start with a fresh mind
- keep yourself updated from major worldwide events
These are just very basic and simple things that you can do which will make your life easier during a hard time in your trading days
I have started a new book on the blockchain. I will try to write more about the technology soon. Let me know if you wish to start trading and need any guidance
take care, stay fit
