PREPARE A MONEY MANAGEMENT PLAN

       You need to prepare a solid money management or position sizing approach. How much of your money will you risk on any one idea? When will you add to a winning position? When will you start taking money off the table? How much will you risk in order to make how much?

GATHER SUFFICIENT CAPITAL TO TRADE

       It takes money to trade. You can’t start with a paltry sum and expect it to last. You can’t expect to get lucky on your first few trades.

“For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?”

—Bible: St. Luke

       The winning trader is prepared with sufficient capital. He understands that he can’t trade on a shoe string. He has decided in advance how much he needs and how much he’s willing to risk. Risk capital is money that you can lose and still maintain your life-style and still maintain your peace of mind. He doesn’t start trading with capital he needs to live on.

COMMITMENT

       The winning trader has made a commitment to the process of effective trading. It’s not a random bet or two. He has laid down the foundations for success. This profession demands training, groundwork, practice, and readiness.

       This does not mean that you should over prepare, or strive for a perfection that does not and cannot exist. That’s research, not trading. As soon as you have something that puts the probabilities strongly in your favor, you’re ready to begin. You don’t want to begin too soon, and you don’t want to begin too late.

       You don’t want to fall into the trap that Jason, a retired engineer, found himself in. He practiced simulated trading in financial futures for five years. He took over 80,000 simulated trades. His trading was profitable on paper, but he never made any actual money because he never put on a real trade. Every day he planned to, but he never did. In the meantime the money in his account dwindled because of his living expenses. By the time I spoke with him, he had barely enough to trade, and he really couldn’t risk it. He had been able to trade before he started his extensive research, but he researched too long and lost the ability to act.

“Sow an act, and you reap a habit. Sow a habit, and you reap a character. Sow a character, and you reap a destiny.”

—Charles Reade