What was the first kind of sign or inclination to you that you could start withdrawing money from your account and kind of enjoying the hard work you put into trading?
So you’re trading, you went through the whole ups and downs as a trader. You are now seeing consistency. You probably have a set of rules. Some of the strategies that you’re following and you’re generating consistent returns. And now you’re asking the question,
I’m not a CTA. I’m not a money manager
so I can’t tell anybody that they have to do this. But, here is what I would prefer myself
Double your account
Let’s just say you open up a trading account with $5,000 and now you have $10,000 in your account. I’m a big believer that as soon as you double your trading account, you don’t take any money out until you double your account and then you take out your initial investment. So you start out with $5,000 and now you have $10,000. Take out the $5,000 and go put it back in your savings account or go put it into another investment, something else, but get it out of your account. And here’s the reason why. I’m a big believer in having your profit make you more profit. And once you remove your initial investment, then psychologically your mind changes and the way that you view and make trading decisions is less fearful as an investor. And you can protect that mindset when you don’t really have any more initial investment in it.
Because essentially if you lose money, you’re already losing profit that you’ve already made. And then you’re in a position of your money making you money, but it’s going to be your profit making you more profit. And for me, I think that puts people in more of a powerful position. The arguments that I hear people say, and I said to myself too, was, well, I have $5,000. It took me X amount of time to get to $10,000 and now starting all over again. Well, you’re not necessarily starting over again. You’re just in a much stronger position.
So let’s just say you decided to do that. Now you doubled your account. You withdrew your initial investment. Now it’s time to start paying yourself.
How do you pay yourself?
I’m a big believer in allowing the trading account to continue to grow and multiply over time. And so what that means is you got to leave some money left in the account.
For me, I like to take the thought process of the best way to go about it is 30% of profits. So let’s say you make $5,000, or let’s say you make $1,000 a month. Pay yourself $300, leave $700 in the account. You may say, but I need more money than that. Well, the question is going to be how much money do you need and how much money do you want? How much money do you desire?
Leave some money in your account
The more money you take out of your account, the less staying power you have for a losing month, number one. And number two, the longer it takes to grow your account. Because before you know it, if you’re leaving 70% of your profits in your account, what happens when you get to a level where you’re making $30,000 a month, $40,000 a month, $50,000 a month, $100,000 a month.
And you are growing your account exponentially and you yourself are physically taking $5,000, $10,000, $15,000, $30,000 a month from your account, but yet your account is growing at over two times the value of what you’re physically taking out, which ultimately means that you can begin to work towards always making more money than what you’ve done previously.
So a lot of people, and that really comes down to desire. So what I mean by that is some people say, I just want to make $2,000 a month and that’s it. I don’t really need any more than that. I don’t want any more than that. That’s fine at that level, but you always want to allow your trading account to grow because you’re going to have losing months.
And what you don’t want to do is you don’t want to continue to take 100% of your profits out of the trading account every single month and then have a losing month because then you have less staying power. If you can leave some money in your account, I like to do a 70/30 split. 70% stays in, 30% is taken out. A little bit more of a longer term game. And before you know it, you’ll be generating all the income that you want. But none of that can happen unless you have a set of rules, a strategy that allows you to generate success. So once again, to recap. What’s a way to go about it.
What I Prefer
What I like or I prefer, and one of the things which I suggest, I can’t tell people, what I suggest would be, as soon as you double your account, take out your initial investment. Have your profit make you more profit. As your account grows, take out 30% of the profit and then get a monstrous trading account and protect the golden goose and get that golden goose super fat, so those golden eggs get bigger and bigger every month.
Everyone, this is Joshua Martinez.