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Friday, September 5, 2008

The Emotional Rationale for the 2% Principle

Quotations of the Day:

"The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading." - Victor Sperandeo

* * *

Challenge Accounts:

Investing Account Balance:
Stock / Futures Trading Balance: $954.13
Online Savings Balance: $47.51

Personal Trading Thoughts: What a day yesterday was. Made some money on that short move we were expecting. Today is about waiting for follow through, or consolidation. First sign of follow through, I'll find some more short plays - just on a day trades if possible. First sign of consolidation, I'm out until Monday.

Personal Investing Thoughts:
My DRIP remains on for all of my stocks. Well, I had been saying for a while, that seasonals only point to a tendency. It seems as if the tendency has begun. So with this break in the relief rally, I will not add further capital to any investments until further consolidation of the overall market.

We're always told "Never risk more than 2% of your account". Of course, for position reasons, this makes mathematical sense.

But what is the 'emotional rationale' of the 2% principle?
... (video included)

Tomorrow, is the 'Week in Review' ...

* * *

Challenge Project Account Balances and
Money Management Numbers:

Investing Account Balance:
Stock / Futures Trading Balance: $954.13
Online Savings Balance: $47.51

Total Trades: 6
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $56.63
Average Loss: $74.27
Accuracy Rate: 33%
Average Reward: $175.34
Risk : Reward Ratio: 1 : 2.1
Trading Money Gain / (Loss): Up + $53.84

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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