(But you're broke, I know, I know, we're gonna fix that!)
“How much do you need to start?” The answer is usually $0 for the simple fact that you need to learn first. Trading is a skill that takes time to develop. Michael Jordan didn’t win 6 titles out of nowhere --- it was only after years and years of training. Now that you're reading this, let’s say you have made learning your top priority and put the work in. You can now formulate a proper game plan, read a chart and have a few demo trades under your belt. You're ready to step up to the plate and make your first trade.
But how much tends to be the million dollar question, as most ask “what's the right amount to start with?”
There is no right or wrong answer to this question, and it usually falls under what you can afford to lose. If you could lose $10,000 maybe start with half of that. If losing $1,000 will cripple you then don't start with more than that and definitely don’t trade on margin. Everyone wants to focus on how much they’ll make -- however real traders are always focused on their risk and how much they can stand to lose.
So ask yourself right now how much could you afford to lose without changing your day to day life. Now whatever that amount is, start with half. Let's say you can risk $2,000 for example, than start with $1,000.
Why start with half?
For two main reasons: If you become a successful trader, 10 years down the road whatever amount you start with will be undeniably comical. If you fail off the bat and say, “Fuck it, this is not for me,” well then you’ll be happy you didn’t blow your wad in one shot. Historically it is very common that untrained traders typically blow up their account on their own and without proper guidance in within a year.
Our goal is to make sure that you don't fall victim to that statistic. So far we have kept our goal in tact, to date we have had zero Alpha members blow up under our watch. I repeat fucking zero.
However if you are on your own or winging it, it isn’t too surprising how often people get smoked, they are entering the most competitive market in the world with no experience. They are trading against people like Shake who can flush the figure to run stops just for kicks. These newbies are the guys who say they can score against the Patriots because they won a few intramural games in college. Why would one expect to walk into the market with people who own the Patriots and expect to crush hedge funds and people with millions or billions of dollars and decades of experience? The answer is delusions of grandeur.
So you start with $1,000 and you’re seeing some success. This is the most important part that most new traders fail to comprehend, which is why so many do not find long term success. They fund their account once and expect this one seed they planted to grow without any water.
The way to grow your account and grow into your buying power is by continuing to fund your account on a consistent basis. The trader with $1,000 wants $10,000. The guy with $10k racks wants to trade with $100k and the guy with $100k wants to trade bars. However, if all of these people jumped up to that magical amount, they wouldn’t be used to the fluctuations in their P&L. This is one of the biggest adjustments to the mental game that new traders physically cannot process. A 1% day with $1,000 is a mere $10, you make the jump to $10,000 overnight that same 1% move is now a $100 day and a 1% move on a $100k account is more than your initial investment. Mentally, you won’t be able to handle these new adjustments and are sure to make emotionally driven decisions, aka MISTAKES.
Commission costs are not a reason for exiting
Why do I know this so well? Well remember the $60,000 loss? Trust me, I learned this lesson very quickly. The upside of more buying power was great until the lucky streak ran out and I had to pay for these exorbitant losses.
Things are cheap to those who save, dear to those who don't!
So what is your game plan for growing your account? Say you have $1,000 (or adjust the number to whatever you can afford to lose.) From there, aim to add 1% to the account a week. Every broker wants you to have more cash to trade so they can make money off your commissions. Setting weekly wires from your checking account into your brokerage account for free and automatically is a must. If you have under $10,000 go to Robinhood, over $10,000 talk to Ben G.
Spare and have is better than spend and crave
You set it up weekly so you don't notice the tiny 1% a week. Now 1% that's $10? Thats nothing, that's so boring. Well if it’s boring, up the number big guy! However the tiny $10 a week will grow your buying power from $1,000 to $1,500 in a year. If you did 2% your buying power would double. Again, if this is a snooze fest for you, then keep adjusting that 1% a year, but by end of year two 1% will grow that $1,000 account to $3,000. Then year 3 that $3,000 account turns into a $6,000. If you have read anything on Warren Buffet you would be aware that his wealth really didn't compound until much later in his life (or noteworthy compounding.) The same principle applies here. Starting early, regardless how small, will shit on the guy waiting until he has that magical $10,000 or $100,000 to start since he’s not going to know shit and his mistakes will be far more costly than yours.
A loss isn't a loss, it's a lesson
I started doing this years ago, and after $10 got boring, I upped it to $20, then $50, then $100, then $200, $500, $1,000 a week, etc, etc. Now had I said start saving $250,000 a year you would say, “Get the fuck outta here!”
That's why we want to crawl before we run. Keep it simple by continuously adding those boring minor increments and thank me later. Consistency is key.
Do you have balls?
Post in your group how much you are saving weekly to fund your account (if you need help forming a saving plan PM Ben and he will help you.)