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Monday, October 26, 2009

Monday Challenge Project Summary: October 26, 2009

Previous Challenge Project Balances:

Investing Account Balance: $667.26
Stock / Futures Trading Balance: $1,521.21
Online Savings Balance: $150.30
Total Challenge Project Funds: $2,338.77

The original video explanation is to be found here.

Rule No. 2 of the Challenge Project states that each month, we can divvy up $100.00 as we wish between the various challenge project accounts. Some time ago I stated that I may split up Rule No. 2, into weekly segments; or, $25.00 a week.

For this week, the $25.00 weekly deposit is being transferred to the Challenge Project Trading Account.

Yeah, if you take a look at the graph below? You'll notice that last month, the Trading Account Equity Balance has remained sort of flat. So I'm going to show the trading account some love this week.

So after this weeks deposit, the Trading Account is $1,546.21. So how much does that leave us to risk? Money management? About $46.00. If I saw a trade where the liquidity was good (high enough volume) and the spread was nice and tight, and the risk was only about $46.00, I might take the trade. Of course, I'd be looking for at least a $92.00 reward, if not more.

This also reveals that we have to show some love to the Savings Account. Because with a balance of $150.30? That means that we only have $37.53 to contribute, if the Trading Accounts Drawdown Kill Switch got hit. So we can see some areas of improvement with the Savings Account as well.

In addition, as noted in the balances below, we're still a little short in the cash that we've reserved in the Investing Account to better Dollar Cost Average (D.C.A.) our existing positions with JNJ, MCD, and KO. So we'll need to give that account attention in future weeks as well.

Here are the new balances for each of the Challenge Project, after this weeks deposit ...

Challenge Project Balances After Rule No. 2 Deposit:

Investing Account Balance: $661.50
(YTD cash and equity up about 34% Return is about -2.8%)
  • 4.1377 shares of KO (DRIP on)
  • 3.0546 shares of JNJ (DRIP on)
  • 2 shares of MCD (DRIP on)
  • Cash: $137.41
-$60.00 of this cash I reserve to D.C.A. KO
-$60.00 of this cash I reserve to D.C.A. JNJ
-$80.00 of this cash I reserve to D.C.A. MCD
-This leaves a -$62.59 shortfall for D.C.A. cash
  • Additional $37.53 available from slush fund
Investing Account Balance Since Inception
(Can be Enlarged):

Stock / Futures Trading Balance: $1,546.21
(YTD cash equity up about 52.5%. Return on Capital is about 2%)
  • 3% risk tolerance gives us $46.38 to risk per trade
  • Additional $37.53 available from slush fund
Trading Account Balance Since Inception:
(Can Be Enlarged)

Savings Balance: $150.30
(YTD cash equity up about 22.3%. Return on Capital is about 1.49%)
  • $37.53 for a Slush fund / Drawdown Kill Switch fund
  • $75.24 for a Base Savings
  • $37.53 for Emergency Savings
Savings Account Balance Since Inception:
(Can Be Enlarged)
We'll be back to the Challenge Project, next Monday.

* * *

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 over 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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