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Monday, December 7, 2009

Monday Challenge Project Summary: December 7, 2009

Previous $500 Challenge Project Balances:

"The Three Sisters":

Investing "Sister" Balance: $747.36

Trading "Sister" Balance: $1,571.21
Interest Bearing "Sister" Balance: $175.30
Total Challenge Project Funds: $2,493.87

Introduction:
The original video explanation of the Challenge Project that began with $500, is to be found here. The Challenge Project is basically a demonstration of a model that anyone could at least follow along with on a weekly basis. It is my attempt without cost, to help out the 'little guy' when it comes to investing and trading by providing an example, a 'model' as it were ... as run by myself as a professional trader with real money, in sub-accounts that I own; following my own three sisters portfolio management system; albeit modified a bit to operate with low funds. From time to time, I provide snapshots of the broker statements.

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.

I told you I hadn't forgotten about the trading account ...

Now ... the question may arise ... when are we going to have another trade in the trading account? Soon. But there's still some more work to do. Take a look over the balances below. Do you see where the Trading Account needs a little help?

...

Personally, I think the "drawdown kill-switch" fund could use some more love. Because as it stands, the trading account could probably only experience one loss, before that "trigger" is hit. So we'll also be spreading rule no. 2 over to the savings "sister" in the future. The end goal for the next phase of the game ... would be to create a "kill switch" of three losing trades in a row.

What is an average loss? Well, the Challenge Project thus far has had an average loss of approximately $66.00. Therefore, it would be reasonable, to have the "drawdown kill-switch" fund built to approximately $200.00. This will require that we begin to build the "Savings Sister" up to about $800.00. That would give us a "drawdown kill-switch" amount of about $200.00.

Now I'm not saying that we won't have a trade for twenty five weeks (that's how long it would take to build up the "savings" sister to $800). What this does tell us however, that in the future, the savings "sister" will need a lot more love, to allow us to trade more actively. We could have a trade right now. But with one loss, the kill-switch would be hit, and we would need to either stop trading, and allow rule no. 2 to recoup the loss and additional funds for account growth? Or we'd have to drain the kill-switch fund.

Therefore, as we build up the savings account in the future, it will allow us to trade more and more actively, once the trading account reaches a reasonable balance.

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: $745.06
(YTD cash and equity up about 53.58% Return is 3.10%)
  • 4.1377 shares of KO (DRIP on)
  • 3.0546 shares of JNJ (DRIP on)
  • 2 shares of MCD (DRIP if now OFF)
  • Cash: $187.41
-$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 -$12.59 shortfall for D.C.A. cash
  • Additional $43.00 available from slush fund
Investing Account Balance Since Inception
(Can be Enlarged):


Stock / Futures Trading Balance: $1,596.21
(YTD cash equity up about 57.5%. Return on Capital is about 2%)
  • 3% risk tolerance gives us $47.88 to risk per trade
  • Additional $43.00 available from slush fund
Trading Account Balance Since Inception:
(Can Be Enlarged)


Savings Balance: $175.30
(YTD cash equity up about 42.5%. Return on Capital is about 1%)
  • $43.00 for a Slush fund / Drawdown Kill Switch fund
  • $89.30 for a Base Savings
  • $43.00 for Emergency Savings
Savings Account Balance Since Inception:
(Can Be Enlarged)


In addition, with all of the shiesters that are drawn to this business, I think it is important from time to time, to include snapshots of the broker account balances; in order to demonstrate to readers that this isn't "make believe". Dan trades real money ...

Snapshots of Accounts:
(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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