Let me show the Correct Way to Trade Bond Futures
PDF - MONEY MANAGEMENT
Money Management is not taught, so I want to take the next 10 minutes or whatever and talk about money management. This is specifically for anyone whose account is down for 2018. Okay? If your account's down in 2018, you should go back to paper trade. You should go back and prove it to yourself that you can make money. Because the worst thing that could happen to you is your account's 50k and then you spent 2019 learning. It's different trying different things. You get more comfortable, you get confident and your accounts down to 42k and then you just paid 8k for education that you didn't need to do.
Let's use the example of a $50,000 trade account. So for a $50,000 trading account, and if you're trading account's five, if you're trading accounts, 500, it's all the same. If you have a $50,000 trading account, the only number that matters is this. That's it. Some of you were on the presentation that I did with my friend Collin. Collin's a professional trader that's been trading with me since 1999 and I asked Collin, I said, "Collin, what's swing trade? He said, "I don't know." Like, "You never heard the term swing trading?" "No." Funny enough, guy I never heard the term swing trading until I started working with retail traders.
Everybody wants to classify themselves as a credit spread trader, as a SPX trader, as a day trader, as a swing trader. We want return on capital. Sometimes the best opportunity will be shorter term trades. Sometimes we'll have a whole longer term. There are different kinds of products that have a different rhythm. Some we have to hold longer, some we have hold shorter. Those are the experiences that you have to learn and that's building your memory bank.
Overall when you have a stop, your stop should not be on the individual position. Your stop should be on this number. So if 50k is here, and that's the value of your account, and it starts dipping, you want to lower risk. As the market goes down, your risk should come off. You should start being careful. You start trading smaller size. If your account goes from 50 to 47 to 46, you should be trading half the size that you trade at 46 than you did at 50. Too many people when they start losing money, they increase their size because they want to make it back. They remember where the account was and so their tunnel vision to try to get to that number. It's a sucker's play. The market doesn't care where your account was.
How I teach is I want you guys, anybody new for sure, take a week, take seven days or five days and trade on paper. Have the goal to make 1K on paper by week's end and then chart. If you do day one, day two, day three, day four, day five, make 200, make 300, make 300, lose 700, make a 100. If this is you, you just made $200. You don't graduate, you have to do this exercise again. Do this exercise again and again and again until you're able to reach your goal of $1,000 on paper.
After you do that, do the same exact thing and try to make 5K, okay? Or 3k, whatever it is, on paper. Keep doing the same exercise until you prove to yourself that you can make 5k or 3K or whatever it is on paper. And then, only after you've done that, do you go live and if you go alive and your account's 50k week one, try to make $1,000. Keep it slow. You're in that building stage. It's not about the money, it's about building confidence and proving to yourself that you can do this.
So all that matters is if you're trying to make a $1,000 in this week, well, you don't want to risk two grand. So just take it slow. Be super, super focused. If the market shows you a little something, all that matters is this number. So on day one or day two, if you're down 100 on the first day and on the second day you're up $600, but you still think the position is going to work better and better and better lock in profit. Lock in profit, you're up 500. You're half the way to your number one goal. It doesn't matter about what you think about the market.
All that matters is your goal. You need to be tunnel vision, unbelievably focused on the $1,000. Unbelievable tunnel vision on the 1,000 on paper. That's all that matters. And if you can't do it, start from the beginning. And by doing that, if your account's 50,000, it's not going to go down to 30k after three years because you've been learning and feeling like you're benefiting and you've tried everything that's out there is under the sun and you're trying a new indicator, but you don't really know how it works or the math behind it. Stay on paper, go through these exercises, prove to yourself that you can make it work and then get in there and risk live money. stock market today stock market crash