The Financial Goals Of A Beginning Trader

I mentioned in the last post that a beginner traders goal should be to lose LESS than 10 percent of your overall trading capital in year one. This of course assumes you can survive for a year from either other income source/s or work outside of your trading. You may be reading this and thinking, "I'm not in this to lose 10% in year one, I'm trading stock to make money", and that's a valid point. Nobody starts trading stock to lose, but the fact of the matter is that most beginner traders get wiped out fast. Very fast. A lot of traders will lose 10% a lot more quickly - some will lose that much in a week. Imagine starting off with $100k and losing $10k in a week. How would you feel? I know how you would feel, you'd feel ill. You'd want to walk away and quit or you would want to get your losses back more quickly so your trading would lose discipline and before you knew it you'd be $20k down and wondering what hit you. You'd be wishing you had just got a job paying $500 a week instead, at least that made you money.

Your Goal In Year One

1) Cover your trading expenses
2) Generate a return of 1.5-2 times the interest rate on comparable riskless method of investment. So if your high paying interest account pays 5.2%, your aim would be 7.8-10.4% return.
3) Don't throw tons of money at gurus and expensive trading systems.
4) Also attribute any expenses from software and learning materials towards your trading account.

If you can achieve a return higher than a risk-free interest rate in year one as a beginner trading stock, then you are on the path to success and can look towards the next level which is becoming a semi professional stock trader - intermediate level.