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Friday, May 2, 2008

The Low Funded Challenge Accounts: May 2008

Challenge Accounts:

Investing Account Balance:
$242.27 (Interest Payment)
Stock / Futures Trading Balance: $734.39
Online Savings Balance: $22.15 (Interest Payment)

Guys. The computer is toast. It can stay on for 20 minutes at a time, but well, it's toast. I'll be ordering a new one today. Regardless, here is the monthly update and plan for the Challenge Project for May, 2008. I have to keep this brief, because I have no idea how long this computer will stay on. I'll give you all it's gory details of the literal 'meltdown' when I get the new computer.

These sub-accounts were created by me back in October 2007 as a main feature of this blog. Their purpose, as well as the purpose of many of the articles in this blog, is to assist the low-funded trader understand what principles he needs to consider when trying to get started in the markets, or if starting up again because his account has been wiped out. That as long as one enters this business with the proper principles, strategy, education and emotional discipline in hand, you can 'make it' in this business. These are actual sub-accounts at my brokerages that I own, and I will look to for growth. I will announce actual trades and investments that I perform in them, and the money management rationals and reasons for my decisions as a means to educate others.

In the beginning of this experiment, I placed $130.00 with Sharebuilder as a long-term investment account, and I placed $370.00 in the account for trading Futures options. I thus termed this the "$500 Challenge". Since we now have $898.38 as a cumulative total in these accounts, not $500, I will term this the "Low-Funded Challenge" instead of the "$500 Challenge". At times I will refer to them simply as the "Challenge" accounts. I later added a small ING Savings account beginning with only $2.06.

I also had three rules for the "Challenge" accounts. At the beginning of each month, I review and consider where we stand, and how those three rules impact the current months decisions. So let's do that for February.

Rules for the Challenge Account:

1) The initial investment is $500.00, to be split amongst the accounts. We did that back in October of 2007. $130 went to Sharebuilder for longer term investments, and $370 went to the Xpresstrade brokerage for futures options purchases. Xpresstrade was later bought out by "optionsXpress", therefore this is now the optionsXpress account. This account is the 'trading' account, for stocks, etf's, and futures options.

2) Each month, I can contribute $100.00, that can be split amongst the accounts however I choose. In other words, I can send $30.00 to Sharebuilder, $70.00 to optionsXpress; or $100.00 to optionsXpress, and nothing to Sharebuilder, etc. So what's the plan this month? This month, $5.00 will go to the Investing Account, $90.00 will go to the optionsXpress trading account balance, and $5.00 will go to the ING Savings Account Balance. I would take more time explaining, but this current computer rig only lasts about 20 minutes before everything powers down.

3) I'll be using regular investment and trade vehicles. Bonds. Stocks. ETF's. Futures Options. In May, I have to get my new computer ordered and setup. I'll keep my daily blogs updated, and will be back in force when that happens. But at the moment? I have to keep my entries brief, and this also means I can't use the computer for trading until I have a reliable stable computer. I'm currently looking at the Dell XPS systems? My brother has one and it's a thing of beauty.

Mays Balances after contribution (before trades)

Investing Account Balance: $247.27
Stock / Futures Trading Balance: $824.39
Online Savings Balance: $27.15

* * *

Investing Account Balance: $242.27 (Interest Payment)
Stock / Futures Trading Balance: $734.39
Online Savings Balance: $22.15 (Interest Payment)

Total Trades and Investments: 3
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $82.56
Average Loss: $82.56
Accuracy Rate: 33%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.02

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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