Step 4: Make sure you have enough money
(A) cash is the fuel needed to start trading, and without enough cash, your trading will be hampered by a lack of liquidity. More importantly, cash is a buffer against the loss of trade.
(B) Cash cannot come from sources you need for other important events in your life, such as your savings plan for your children’s college education. Cash in trading accounts is “risk” money. This money, also known as venture capital, is an amount you can afford to lose without affecting your lifestyle. Think of money in trading accounts as holiday savings. You know that the money will be spent when the holiday is over, and you agree with that. Acting involves a high level of risk. Treating your trading capital as holiday money does not mean that you are not serious about protecting your capital, but rather that it means that you have to psychologically free yourself from the fear of losing so that you can actually do the trading deals necessary to grow your capital. Again, you should perform a personal SWOT analysis to ensure that the necessary trading positions do not conflict with your personality profile.
Open Next Page To See more