Capital gains management for a trading account
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A good trader always has maximum loss targets and maximum trading performance targets.
These objectives are daily, weekly and/or monthly.
In practice, here is an example of what this produces: a trader sets his objective to make 0.25% a day, 1% a week, or 4% a month. As soon as one of his objectives is reached, he stops trading. These objectives are reached. If there are losses, the trader has also set his objectives: 0.15% a day, 0.75% a week, or 2.5% a month. As soon as one of his maximum loss targets is reached, he stops trading.
This is just one example. Generally, traders outperform their profit targets but stop correctly if their maximum loss targets are reached.
In the long run, a trader manages to generate profits, but what does he do with them?
Most traders who generate profits on their trading account keep all gains directly ON their trading account. Each month, the capital gains recorded become an integral part of the capital. More and more capital for more and more profits? Don't you end up by never taking advantage of your added value with this management? Aren't we likely to one day see all our capital gains, recorded over X years, go up in smoke on a "folly". Crushing!
This is where I think you have to know how to manage your added value properly.
Here is an example of what could be done:
50% of the capital gains become capital, allowing the trader to also cover any possible losses in the following months. If there are successive profitable months, the capital increases so generating more and more profits.
50% of the capital gains are transferred back directly to your bank account. It's up to you to take advantage of it. Keep it to accumulate a nice little capital nest egg, which you could use to give yourself the car of your dreams, a trip, or a simple bouquet of flowers for your wife. This capital, nest egg, set aside could also be used to open another trading account in case of losses on a psychological breakdown.
What do you think of that?
The percentages quoted are not necessarily the most accurate, but what is your opinion?
These objectives are daily, weekly and/or monthly.
In practice, here is an example of what this produces: a trader sets his objective to make 0.25% a day, 1% a week, or 4% a month. As soon as one of his objectives is reached, he stops trading. These objectives are reached. If there are losses, the trader has also set his objectives: 0.15% a day, 0.75% a week, or 2.5% a month. As soon as one of his maximum loss targets is reached, he stops trading.
This is just one example. Generally, traders outperform their profit targets but stop correctly if their maximum loss targets are reached.
In the long run, a trader manages to generate profits, but what does he do with them?
Most traders who generate profits on their trading account keep all gains directly ON their trading account. Each month, the capital gains recorded become an integral part of the capital. More and more capital for more and more profits? Don't you end up by never taking advantage of your added value with this management? Aren't we likely to one day see all our capital gains, recorded over X years, go up in smoke on a "folly". Crushing!
This is where I think you have to know how to manage your added value properly.
Here is an example of what could be done:
50% of the capital gains become capital, allowing the trader to also cover any possible losses in the following months. If there are successive profitable months, the capital increases so generating more and more profits.
50% of the capital gains are transferred back directly to your bank account. It's up to you to take advantage of it. Keep it to accumulate a nice little capital nest egg, which you could use to give yourself the car of your dreams, a trip, or a simple bouquet of flowers for your wife. This capital, nest egg, set aside could also be used to open another trading account in case of losses on a psychological breakdown.
What do you think of that?
The percentages quoted are not necessarily the most accurate, but what is your opinion?
