Expert Stock Market Trader Instructor Richard Rizzo finds his students struggling with the transition process of paper trading on a demo software platform to trading with real live money. This 3 part article with provide step by step advice on how to over come this challange. (Part 3 of 3)
Alternative Profit Goal Schedule: There is an alternative profit goal schedule that requires less risk and may be easier to attain your daily gross profit target. This can be done by simply increasing your average position share size and NOT increasing your daily profit target. Know that increasing your profit goal ($0.30 to $1.00) may not always be necessary if you are satisfied with making approximately $400 per day (more or less).
Understand that increasing the daily goal is more difficult than increasing your average position share amount. Therefore, some traders choose to increase the share amount only and keep their daily profit goal in the “Safe Territory” of $0.30 to $0.40 per day forever. However, graduating to 1000 shares presents the best mathematical scenario regardless of your profit goal. For example, you may choose to keep your profit goal at $0.40 per day and increase your average position share size only. The alternative schedule below will show how graduating to 1000 shares may provide a sufficient Daily Gross Profit using a maximum profit target of $0.40 cents per day.
Stage | Average Position | Profit Goal | Number Of Trades | Daily Gross Profit |
1 | 100 shrs | $0.30 | 6 to 8 | $30.00 |
2 | 200 shrs | $0.30 | 14 to 18 | $60.00 |
3 | 400 shrs | $0.40 | 16 to 20 | $160.00 |
4 | 600 shrs | $0.40 | 20 to 25 | $240.00 |
5 | 800 shrs | $0.40 | 24 to 28 | $320.00 |
6 | 1000 shrs | $0.40 | 28 to 32 | $400.00 |
Customizing your personal Profit Goal Schedule: There is no concrete schedule for all individuals. The alternative schedule above and the primary schedule discussed earlier are general guidelines used to dictate the maximum profit goal and average position size to follow safely. However, you may design your own personal goals to a position size and profit goal that is most comfortable for you. (As long as you do not surpass the schedules provided in this lesson.)
However, the alternative schedule above will provide the best mathematical scenario to provide the most Daily Gross Profit with the least amount of risk. Naturally, reaching a daily profit goal of $0.40 cents is much easier than attaining $0.60 to $1.00 per day. As you can imagine, statistics show that traders who follow this alternative schedule last much longer than those who push themselves to reach higher goals.
Profit Goal Regression:When using the primary or alternative schedules discussed in this lesson, it is always best to regress to an earlier stage when experiencing losses or difficulty in your current stage. For example, if one graduates to stage 3 and finds themselves losing consistently, they may want to regress back to stage 2 with less shares and a lower profit target. After several weeks or months, you may try again to graduate to the next stage.
Expert trader Richard Rizzo shares stock market trading education and advice on setting up the transition process from trading on a simulator (paper trading) to trade with a real live trading account.(Click here to see parts 1 and 2 of this three part article)
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