prepaid trading - V

if you don't know driving
what would you learn first?

a small car?
a truck?
a bull-dozer?

where would you test drive it?

open ground?
in the himalayas?
crowded chandni chowk?

--

ok.

now if you don't know trading
what amount would you test trade with?

1,000?
3,00,000?
30,000,00?

--

i know u said 1,000.

but i also know u traded
3,00,000
or 30,00,000

no wonder, the result was obvious!

--

below
i share with all new traders
a method
that one of my fellow trader friend uses!

every month
he sets aside 3000 bucks to trade!

"even if i lose all of this
i don't mind!
but i will neither add a penny
nor take out a penny
from this amount
for this month!"

what he does is simple.

using his method
he studies the graph
waits for the opportunity
and once he spots one
he buys a call or put option
(as the case may be)
worth 3000!

e.g. taking today's value
if he were to take a short position
he would have bought
5300 put (march series)
(52.5 x 50 = 2625 + 113 brokerage = 2738)

now suppose
the market were to go up
and he loses 1100 bucks
he would
be left with approx 1800.

he will learn his lesson
look for the net opportunity
and enter the next trade.

but with what amount?

1800!

taking today's rates

he would have bought one lot of
put 5200 (march series)
(34.9 x 50)

for the sake of example
suppose he again loses 700
he would be left with around 900
(after brokerage etc.)

now he would again search for an opportunity
to learn and hone his skills
and enter a trade!

but with how much money?

900!

taking today's rates
he would buy
a 5000 put
(13.75 x 50)

i took just the losing scenario.

if he were to profit,

he would buy the higher priced option.

this process would continue

till expiry!

next month

he would trade

with the opening account for that month

which would be the closing amount of last month

plus fresh fund infusion of 3000!!!

--

this way

he is learning

plus he is not afraid of losing too much

plus he is assured of a long stay in the market

plus he has a chance of making it big as well!

he knows what are his expense boundaries

he is trading prepaid!