What to do with profit money?

Hi all...I'm up in my forex account a bit and I was wondering how to reinvest profit money (i.e. education, more tech stuff, or subscritions). I've got a million books in the 'to read' pile so I think that's out. I was thinking of maybe getting a PDA and trading wirelessly...there's a lot of money I could be making while at work.

So my question is to you guys, how do you reinvest your profit money (or do you just keep it in your account, which I also thought about doing)?

Use the POWER of compounding man....If you consistently make (Let's say) 5% a month, that's $50 if your account is $1,000, and that's $500 if your account is $10,000 and it's $5,000 if your account is $100k...So the larger your trading capital, the better and the higher the return...Profits accumulate and mushroom quickly if you just let them grow, without cutting them wildly often...That's my own opinion...

I want to give you an opinion about wireless trading as well as I am using it through my Pocket PC...Don't expect that you are going to trade the same way you are trading from your PC through your PDA...Everything is different...You will see a different platform, you will see very poor charts, you will see minimal indicators if any, you will refresh manualy, and many drawbacks, so nothing better in wireless trading...

It's only good for 2 cases, to watch the markets while on vacation (Either you have open positions or not), and for disasters, like you are having a power failure at home, your internet connection is down and your ISP don't know when they are coming back, and so on, but it's not as reliable as desktop or laptop trading...


Thanks,

Nader

It really depends on how much money you are talking about and what that money means to you. If you only have a $10k account and you made $5k for the year and you have a job, there really isn't any point in spending that money because if you do, then next you will make $5k - what is the point in that?

What are your objectives in trading? Are you looking to trade full-income or just do it as a hobby? If you want to trade full-income then you will need the largest float that you can get your hands on so don't spend your profits. If you are doing it as a hobby, then spend it on something fun.

Regardless of your objectives, you should always reward your self for a job well done by treating yourself to something special. What that special thing is will depend on how much you made of course.

Simon

DUDE!!! traders dont spend their profits! they either grow them or lose them

I wish you keep them first, then grow them, that's usually how it works, reserve your capital first, and then think about growing....


Thanks,

Nader

You make valid points, but I don't see how even a 50% bump in account value contributes to a real gain in leverage/compounding....

Example....lets say you have a 10k account and your broker gives you 100:1 leverage....if you suddenly have a 15k or 20k account, your leverage is the same....there's no marginal benefit by having that extra 5k unless you use it....right?

My broker gives me 100:1 leverage and I find I RARELY use 20% of what they'll allow me to...does this change my situation any? Should I be using a higher percentage and keeping closer stops to offset risk?

My long term goal would be to trade full time, for a living.

i think you may want to read up a little on true leverages instead of margin available. I'm not sure the exact thread, but if you look, you will definitely find it.

eg..
you may have 10k, but if you only trade one lot(100k), in reality your true leverage is only 10:1 not 100:1.
your margin requirements are 100:1 is what your broker is saying, not an actual true leverage of your money.

amount risked and percentages and s/l are related but another story as well.

definitely search for those threads that were discussing leverages.. specifically search for true-leverage, you should be able to find something.

hope that helps.

ken

A valid example...Let's say you start out with $10k, you use only 1 mini lot in every trade, risking only 2% of your capital which is $200 (200 pips stop which is a wide stop)...Now suppose that you are now up 50%, which means that you have a $15k account...If you are keeping the 2% risk you are talking about, then it's $300 and not $200, to keep it as $200, it won't be a 2% anymore, it will be a 1.333%...You can tolerate more drawdowns now than you could before...That's a good advantage...

Let's say that you are looking to get bigger and decide to increase your position size to 2 mini lots...Risking $300 means going to keep it as 2%....In this case, the stop is 150 pips away...If this stop is fine with your trading strategy, then your profitable trades are going to make double what they used to make from now on...That's another good advantage as it will allow you to grow your account faster than before..


Thanks,

Nader

If you are using a fixed % risk position sizing model then your new positionsizes will be 50% large and you will make 50% more money in each trade then you did previously.

Simon

Thank you Narafa for continuing to harp on this subject. I blew out a $10K demo account, mostly with margin calls, before I figured out true leverage. I am doing much better now with $1k mini demo accounts and keeping them alive with various trading systems that I am trying. My dicipline and money management are much better, and if all goes well I will go "live" in May.

To paraphrase a wise man: "There are only two types of people, those who understand intrest (read compounding) and those who don't. Those who understand it get it and those who don't pay it!" --- Heber J. Grant ---
(50! whooopie)

I can't answer, because I haven't experienced you like that.

It seems to me that the best way to use the profit from capital in the market is to take part of the profit for your personal needs, and to leave the second part of the capital in your account in order to increase your earning opportunities. After all, it's no secret that if you have a large amount on your account, you can use a large amount for a specific transaction, which in your opinion is the most profitable, or to concentrate on the fact that you immediately use a lot of assets and organize work in a quantitative direction. In any case, this option will be much more interesting than just constantly taking profits and constantly working with the same amount. It is necessary to increase your chances in the market.

I'm a great believer in not putting off living life. I spend any profits (over and above living expenses) on living. Not necessarily buying "stuff" but buying experiences, travel, that sort of thing.

I think as traders we spend a lot of time thinking of the future and planning for the future, but my trading got better once I started actually enjoying my profits instead of continuously thinking about reinvesting.

This is pretty much my philosophy now:

https://www.thistradinglife.com/post/dream-trading-life

Plenty would disagree, but for me, living life now has made a huge difference to my happiness.

If the goal is to really Grow Capital, then leaving it alone while progressively and appropriately increasing size, is a method to Grow Capital. Unless the starting Cost Basis is already significant, then reinvestment of capital with appropriately increased Cost Basis per trade, becomes just about the only way to grow rapidly. Of course, all of this entirely depends your ability to mitigate risk and manage trades to profitability on a long-term basis.