The first step is extremely important for your sanity as a trader. You have to set goals that are appropriate to your financial position and your makeup as a person. You need to answer some basic questions such as:
How much money am I investing?
The total amount you are investing determines how many shares you will buy of each company and how much loss you will be willing take on each trade so it is important to determine the amount. It will vary as you trade so you will need to reassess regularly.
How much time will I invest?
How often do you want to watch the market activity? The Redline System assumes you will watch every day after the trade closes as a minimum.
What level of return will I aim for?
This will change depending on the overall market cycles and your own personal appetite for risk. If you are happy to aim for 10% per year to out grow your mortgage, then you can choose some very solid slow growing companies that are unlikely to catch you out with a sudden drop in share price and your safety level will be high. If you aim for 200% per year, you will have fewer companies to choose from and could easily lose thousands in sudden moves. Then again you may achieve your goal in which case you will do very well. Your goal return will determine which companies you choose to trade and therefore the risk and return levels expected.
We recommend starting with a goal of 20% if you are beginning to trade and then as you succeed, you may reassess. It is always tempting to aim higher but until you can practise managing your trades, it can be dangerous.
Who can I get support and advice from?
At various times you will need others to assist you. You need to determine now where you can turn for help and or advice. Join a forum online to interact with others who are trading. If your money is not all your own, we advise educating your partner about the risks and rewards and discussing permission and decision making processes before you start trading. Regular updates and reassessing your position together will help to avoid any problems.
How will I stop this from consuming me?
This is an important question for good times and bad. At the end of the day, this is only money and whether you increase your balance or discover trading isn’t for you, it doesn’t change who you are. There is a strange link between success and ego which becomes very prominent when you begin trading because you are taking such responsibility for the outcomes. Be aware of it and discuss it with trusted friends to ensure that you can trade and remain a balanced person.
One excellent way to maintain a balanced view of your money and wealth is to commit to giving a percentage of your profits away. We recommend finding a good organization that you feel confident supporting and giving them 10% of your net profit each year. Most are tax deductible and it will help to remind you that it is only money and that many are not as fortunate as yourself.
