Starting Again With a £500 Opening Account Balance

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So it’s been an eventful couple of weeks.

I deposited £500 at the end of July (2012) 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.

Money Management

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.

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