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Tuesday, June 2, 2009

Outline for the Challenge Projects Strategy

"It's not the plan that is important, it's the planning." - Dr Graeme Edwards

I've received many, many questions regarding the Challenge Project.

Which is great! That's what I'm here for! The low funded, as well as for folks who got themselves in the same position I got myself in from 1996 to 2000. Which is when I was repeatedly blowing up my account.

Most of those questions revolve around the strategy that I have for the low funded challenge project, moving forward. What are my plans? Do I plan on touching the investment account again? What about the slush fund? How will that work?

Well, here's the strategy for each account moving forward. The Trading Account, the Investing Account, and the Savings Account.

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Of course, we are in stage one at the current time. What I call the "really tiny" account phase. We can have 1 loss, both in terms of the drawdown kill switch, and in terms of risk tolerance until we wait for the infusion of new capital. In a few months, we'll be moving to phase to, or what I call the "smaller" account phase.

But notice, later on, that the Drawdown Kill Switch becomes equal to what I have in the Savings Account for the slush fund. This means that a) I always have money in my savings account, earning interest, b) money ready to go in case that drawdown kill switch is hit.

Now, let's move to the Investment Account.

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At the current time, I do not see us within an investing environment. That can change. I always tell people that in 2004, I was investing 60% of my money, and trading perhaps 30% of my money, and saving 10% of my money.

Right now? I'm trading all of my money. I don't like investing much, in an environment where companies are legally permitted to "cook the books" with "mark to 'model'" accounting. But I continue to hold on to my DRIP dividend portfolio. I was telling the guys in the Ventrilo Market Buzz server yesterday that years ago ... come November and December? I used to buy investment stocks like they were going out of style. Basically, until I was out of cash.

Last November, I think I bought one stock.

But that can change. And if I see a deal, say on a stock like PG, or GIS, then I will add it to the Challenge Project Investment Account. Or I may add more weight to KO or JNJ. BAC I'm dumping as soon as it's profitable.

Now let's move to the Savings Account.

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So, we see for the Savings Account, that I view the account balance in three parts. What I use for a) emergencies (which I give prime importance to), what I use for the b) slush fund for either the trading account, or the investing account, and what I use for c) a base savings.

As they grow, each account will feed the other accounts, depending on performance.

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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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