Money Management

Money Management Goalpost for S&P 500 Day Trading

The starting trading capital for day trading should be no more than 5% of your trading assets. The starting trading capital for swing trading should be no more than 25% of your trading assets. The increase of trading capital goalpost is based on 50% reinvestment of your gross profits. The key to success is discipline; keep your trading capital small until you develop your skill to move up to the next level. You have to earn your way up.

The method I use employs compounding to increase account size. Everyone has a different timetable to develop their trading skills. This money management goalpost is a good guideline to help you accurately measure what level you are in. There are no short cuts. Your trading results are a direct reflection of your psychological make up and trading is 90% psychological. When the market is moving up and down, those are the psychological turning points of the people that are trading the market. As you all know, everyone has a different psychological make up. That’s why everyone has different trading results. To be successful in trading you need to have a plan to defeat the market. The system is a part of the plan, but before you trade you have to know your limitations in order to develop skills to control the emotions of trading.

Based on a starting account size of $20,000.00 or less, start trading with no more than 1 E-mini contract. The following goalpost is based on 50% reinvestment of your net profits. This will take a minimum of 800-points of net profit to reach stage 8. Each stage is a goal that you want to achieve. Remember, the key to success is discipline; by keeping your trading capital small you can develop your skill base to move up to the next stage.

At the end of each stage, transfer 50% of the profit into a reserve account. The remaining 50% profit is held in the trading account in order to continue to the next stage. If your slippage average starts to climb over 0.5 point per trade, go back to paper trading.

Total risk capital $20,000.00, open 2 accounts.

Account A is your trading account, $5,000.00.

Account B is your reserve account, $15,000.00.

Stage 1: Paper trade until you have made at least 200 points per contract with the last 20 trades <= 0.5 points slippage per trade.

Stage 2: Trade 1 E-mini until you have made at least 100 points with <= 0.5 points slippage. Before moving up to the next stage, you should have net a minimum profit of $5,000.00 in Stage 2.

Beginning account A balance - $5,000.00, increased to $10,000.00

Transfer $2,500.00 profit to account B

Ending account A balance- $7,500.00

Ending account B balance- $17,500.00, total asset for account A and B - $25,000.00

Stage 3: Trade 2 E-mini’s until you have made at least 100 points per contract with <= 0.5 points slippage. Before moving up to the next stage, you should have net a minimum profit of $10,000.00 in Stage 3.

Beginning account A balance - $7,500.00, increased to $17,500.00

Transfer $5,000.00 profit to account B

Ending account A balance- $12,500.00

Ending account B balance- $22,500.00, total assets for account A and B - $35,000.00

Stage 4: Trade 3 E-mini’s until you have made at least 100 points per contract with <= 0.5 points slippage. Before moving up to the next stage, you should have net a minimum profit of $15,000.00 in Stage 4.

Beginning account A balance - $12,500.00, increased to $27,500.00

Transfer $7,500.00 profit to account B

Ending account A balance- $20,000.00.

Ending account B balance- $30,500.00, total asset for account A and B - $50,500.00

Stage 5: Trade 4 E-mini’s until you have made at least 100 points per contract with <= 0.5 points slippage. Before moving up to the next stage, you should have net a minimum profit of $20,000.00 in Stage 5.

Beginning account A balance - $20,000.00, increased to $40,000.00

Transfer $10,000.00 profit to account B

Ending account A balance- $30,000.00.

Ending account B balance- $40,500.00, total asset for account A and B - $70,500.00

Stage 6: Trade 5 E-mini’s until you have made at least 100 points per contract with <= 0.5 points slippage. Before moving up to the next stage, you should have net a minimum of $25,000.00 in profits in Stage 6.

Beginning account A balance - $30,000.00, increased to $55,000.00

Transfer $12,500.00 profit to account B

Ending account A balance- $42,500.00.

Ending account B balance- $53,000.00, total asset for account A and B - $95,500.00

Stage 7: Trade 8 E-mini’s until you have made at least 100 points per contract with <= 0.5 points slippage. Before moving up to the next stage, you should have net a minimum of $40,000.00 in profits in Stage 7.

Beginning account A balance - $42,500.00, increased to $82,500.00

Transfer $20,000.00 profit to account B

Ending account A balance- $62,500.00.

Ending account B balance- $73,000.00, total asset for account A and B - $135,500.00

Stage 8: Trade 10 E-mini’s until you have made at least 100 points per contract with <= 0.5 points slippage. Before moving up to the next stage, you should have net a minimum profit of $50,000.00 in Stage 8.

Beginning account A balance - $62,500.00, increased to $112,500.00

Transfer $25,000.00 profit to account B

Ending account A balance- $87,500.00.

Ending account B balance- $98,000.00, total asset for account A and B - $185,500.00

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