Saturday, December 3, 2011

Speed up the growth of your account

After having been training traders for over a year, teaching them how to use the Diamond Setups profitably week in, week out, I was able to improve the system even more with their feedback, that was my initial idea for sharing my system, having feedback from different traders so that I could know where I had to tweak the system to make it even better, and that mission has been accomplished, today, if we use the system religiously we are bound to make money every single day, little by little but surely.

As  day traders we don't make big hits, although, with this volatility we've had many trades that allowed us to make 10, 20 even 50 points on ES (Emini SP500 futures) in a single day, on most of the days we end up making from 5 to 10 points on full size (yes, per lot) if a trader takes all or most of the good setups that are triggered on our trading system everyday.

I make from 3 to 8 calls everyday in our trading room and as we know that over 80% of them will work or at least will stop us out at b/e (break even), those are the statistics, it happens everyday, so we confidently take most of the trades triggered by the system.

Just to illustrate with a real example, last week we had no full size stop outs on the whole week out of 28 calls, really nice indeed. By the end of the week, those who took all 28 trades were up 15.50 ES points per lot.

With that knowledge we have created a money management system that allows us to speed up the growth of our account with a very simple rule: we double the size we trade (or increase by a good amount) every  time we reach a target that is big enough so that even if we get stopped out 3 times in a row we will not risk our initial investment, in other words we play a little more aggressively than in the beginning after we accumulate some profits, let me give you an example:

Suppose our account size is US$ 20,000, as a conservative trader we'd start by risking a maximum of 3 or 4% on each trade or US$ 600 to US$ 800. Trading the ES (Emini SP500 futures) we would start trading with a maximum of 4 lots and would use a STOP of 3.50 ES points.

So, by trading 4 lots our initial target for doubling the size we trade will be US$ 25,000, that's the number that will allow us to trade 8 lots and even if we lose 3 times in a row, we will be risking only the profits we have made.

Now to be able to increase again our trading size from 8 to say 16 lots we will need to make at least US$ 4,200, so let's say that our next target will be US$ 30,000 to include our broker's money.

So now your account size is US$ 30,000 and yoou're trading with 16 lots, because you know that if you follow the rules and only take those trades that are triggered by the system you will win over 80% of the time, so what's your next target?

By doing that you speed up the growth of your account with a very simple risk management rule, this simple technique can take you wherever you want to go, it will only depend on the size of your dreams.

This business is one of the few business that can make you fly really high! Even if you start small. But don't fool yourself, the smaller you start the slower you have to move in the beginning, as in this stage you will be like a baby and babies are not supposed to run like an athlete. Discipline + patience = success.

Take the right decision and start doing the right thing now, don't postpone it anymore. Use a methodology that works.

“When your desires are strong enough you will appear to possess superhuman powers to achieve.” - Napoleon Hill

Best of luck in your trading!