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Monday, March 2, 2009

The Low Funded Challenge Account Project: March 2009

Last Month (February 2009) - Challenge Project Balances:

Investing Account Balance: $370.00 (Average)
Stock / Futures Trading Balance: $1,074.62
Online Savings Balance: $153.51

The original video explanation of the Challenge Project is to be found here.

A video summary of my decisions for this month is to be found at the end of this blog entry.

Back in October of 2007, I created sub-accounts from my main brokerages; as a main feature to this blog, and in November of 2007, I began the Challenge Project. 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 or her account account has been wiped out. 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. I wish to demonstrate 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.

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 later added a small ING Savings account that has been built up to a balance of $153.51. Due to the initial investment, I once termed this the "$500 Challenge". Since we now have much more in these accounts than $500 at the end of February, I will term this the "Low-Funded Challenge Project" instead of the "$500 Challenge". At times I will refer to them simply as the "Challenge Project" accounts.

I also had three rules for the "Challenge Project" 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 March of 2009.

Rules for the Challenge Account:

1) The initial investment is $500.00, to be split amongst the accounts. After creating the accounts in October of 2007, we had our initial deposited transferred in November 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. Therefore, rule #1 is always complete.

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. Last month we deposited $30.00 to the Savings Account, $10.00 to the Investing Account, and $60.00 to the Trading account.

For March 2009's deposits, I decided to send the entire $100.00 to the Trading Account.

I'm probably not going to be engaging in any trades for the Challenge project in March, as 1) The Account Balance is still very, very low, and therefore 2) the primary job is to get the account equity bumped up. In addition 3) Options are pretty expensive at the moment, and we cannot afford to "up" our risk per trade, simply because we're over the $1,100.00 level.

However, we are now over the $1,100.00 level, and that works out well. Why?

Well, look again to the growth strategy we've had all along. If you note my project strategy video (located here), for a long time, we were looking to get past the first step in this phase of the project. Thus, we were looking for the trading account to have an equity greater than $900.00. We've accomplished this, as we now have a balance of $1,174.62 at the beginning of March 2009? We're past that second 'phase'. I'd like a little more equity before taking on another trade, so we can comfortably stay within this range. The next goal is to get the account past $1,900.00.

Remember. The goal right is not to actively trade that account. It's to get the account equity balance bumped up. I want to say that again. The goal right now, isn't to primarily trade that account. It's to get the account equity balance bumped up. And as it is, that cash is becoming more and more valuable as the days go back, as deflation takes a hold of the entire economy.

3) I'll be using regular investment and trade vehicles. Bonds. Stocks. ETF's. Futures Options. I want to wait and bump up the equity, so I probably (probably) will not trade anything in the Challenge Trading account in March. Unless a good, $90.00 option comes along, with the right delta and theta. Just takes the right trade. It's interesting how fast those can develop.

We're cruising right along ...

(Video Included. If you're seeing this entry elsewhere and cannot play the video? Click this link to go to the exact blogged vlog entry ...)



March Balances after Deposit from Rule #2

Investing Account Balance: $370.00 (This will fluctuate with the BAC, JNJ and KO stock, as well as dividends paid)
Stock / Futures Trading Balance: $1,174.62
Online Savings Balance: $153.75

* * *

Note: 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 13 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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