Perhaps, there is a small percentage of traders who are captivated by the process of trading, and for them, the numbers in the broker’s account have the same meaning as the virtual currency in the online game. The vast majority of traders are still trading with the hope of high profits that will allow them to realize their material dreams (and spiritual goals also require funds – look, for example, how much a ticket to the Milan Opera costs).
The problem with managing a trader’s profits is that it is not a paycheck. It is the result of doing business, which, after the withdrawal of profits, must continue to function. Hence – several questions for beginners: when to withdraw money, how much to take and how much to leave, whether it is necessary to increase the deposit…
Mistakes made by beginners who have not yet worked out a strategy for disposing of their earnings are also quite common. Here are a few typical situations:
He earned a lot, but soon “lost” everything in unsuccessful deals;
He withdrew a lot of money, squandered it all in restaurants, and spent it on things that were far from necessary, now he looks at the deposit with hungry eyes;
Withdrew money, but “snagged” the deposit, and the system of low-risk trading in the stock market is now in question;
From month to month “hypnotized” increasing account, unable to withdraw at least a thousand dollars, and meanwhile accumulated fines and penalties on loans and utility bills.
Yes, a strategy is needed not only for trading on the exchange but also for managing the money you earn. Here it is also important to engage forward-looking thinking and act in a mature and balanced manner.
Skimming the Cream
Profits in trading are often compared to the cream: the bulk of the money works, the “milk” is whipped, and the profit accumulates a sort of top layer. This is exactly the layer you can skim off by following two basic rules:
- Do not reduce the initial amount of the deposit. If you take trading seriously, you have an investment plan, a strategy, a system of work. And, of course, you understand that reducing the initial deposit may break your system: since before a major profitable trade you will have to wait out a succession of losing trades, you need a financial reserve. Otherwise, at one far from the wonderful moment, you may find that there is simply no money for new transactions.
Remember: the initial amount of the deposit is untouchable! Withdrawal of money intended for trading in your strategy is tantamount to the sale of the factory floor. The trader’s money is like a shopkeeper’s goods, no money – no business.
- Do not confuse profit with income. Profit is the net “cream,” from which the brokerage interest has already been deducted and working capital has been accounted for. Beginners who are happy with literally every hundred dollars, increasing the deposit, are often inclined to withdraw profit in small amounts and close the transaction less than 10 times their potential. The golden rule of thumb is to withdraw 50% of profits from any good trade.
Fear and greed make a person withdraw the first “curd” that appears in the account or exit the trade prematurely. We have already written about these enemies of traders. Do not succumb to their influence.
What layer of “cream” must be accumulated to be able to take it off painlessly? Recommendations on this subject vary, but in general, professionals advise to withdraw the profit when the deposit doubles or triples. You should not withdraw earlier than 1.5 times the deposit size: such a layer of “cream” increases self-confidence and reduces stress. But, at the same time, you should use your profit only within the framework of an investment plan.