So it’s been an eventful couple of weeks. I deposited £500 at the end of July into my spreadbetting account with Ig Index and in the space of two weeks, managed to trade and make a profit of £470, only to trade some more and lose all the profits to take me back to my original starting amount (+/- a few quid). I think I’ve learned a little bit, and will now try trading again, this time with a more disciplined approach.
I am now determined to trade to strict money management rules. These rules will be as follows:
- Only ever risk 10% of total capital per trade (I’d like to go smaller but my starting balance isn’t so big)
- Always set a stop loss to match total risk
- Always aim to make a 100% return on every trade eg. if I am risking £50 per trade (10% of £500), I need to make a £100 profit.
- Only trade where 100% return is possible – eg. If there is not enough upside potential to meet my trading criteria, do not trade.
Do Proper Research and Trade within a Strict System
I can no longer afford to place impulse trades, so every trade must follow a trading system. The system I am going to use is this:
- Share prices must show a directional trend for at least 1 month
- I must read all news/reports published through RNS for the last two months before trading
- A google news search for the company should reveal no nasty surprises
- The share price should be experienceing a price reaction against the trend
- Open my position with my designated stop loss in place and my price limit set. I must not ‘follow the trade’ every hour but instead, open my position then do nothing with it until I am either right or wrong.
Take My Time
It’s ok if it takes a share a month to hit my targets. In the past, I’ve been guilty of wanting to make money too quickly, ‘£100 a day’ was the thought running through my head. Now it’s just going to be 100% return on my capital every month, and this could be in 1 trade or it could be in 10 trades.
I have made my first trade within the laws of this new system, and I’ve done a full write up in a blog post of it’s own.
I’d appreciate any comments if anyone comes across this and sees any holes in my system. I need all the help I can get.