Turning $200 into a million dollars
If you want to make a lot of money in the stock market you need to start with more then $200. I’ve been trading stocks and options for about six years.
I’ve read many books, worked with many systems and techniques. I’ve had big wins and big losses. As with most traders who have lost big it was because they didn’t follow their rules, plans and second-guessed their strategy.
I feel strongly that I can make money if I follow my rules. If I lose quickly in the beginning I’m out quickly and the experiment is over.
I’m sure some will giggle and think this is a waste of time, I would. But, I believe having an open blog will help my discipline. The best of the rules I know are to cut losses quick, ride winners and small position sizing.
Obviously, with $200 position sizing will have to be a gradual rule to follow later. I have to start with 100% risk. This is why I could be out quick and you may never see this blog because it has been deleted.
The other day I thought about stocks, options and reaction to news. One thing that made a lot of since was bad news will send a stock down, but bad news that offers continuing bad news is the killer. Bad news can offer traders an opportunity to pick up a good stock on sale. Continued future looking bad news will keep it going for a longer time and traders will keep selling or not buy it for a while. Good news can go either direct. Traders seem more willing to take profit then purchase a bad news stock.
As far a long term trades. I prefer to go long. I’ve proven to myself I am a very good long stock picker. It’s the short term trade, I’ve had the trouble with. Mostly due to not following my own rules resulting in bigger losses.
The first day I tested this idea was when the DOW went up around 300 point and hit new highs. I was short or had a put on a bad news stock. I made 20% that day.
At this point, since the being in of the month when I started with about $182, I have made six trades. Yesterday I was at about $270. But, after today I’m down to $204. I’m still up 12% on the month. The Dow when down 226pts and I lost money. My first selection this morning was a little too expensive, so I didn’t buy. It ended up being a good pick. My second pick was a stock that was bouncing. But, in my opinion, should have continued to crash on a day like today. I was wrong. I bought too cheep a put .75 cents and sold it for .60. My normal stop is around 10 cents. So, even though I pulled my stop, I was still able to get out without losing it all.
I have $204. It’s time to make it a million.
Is this the ranting of a desperate man? Not really, but after six years I need to either do it right or let it go. I’ve taking $2000 and made it $200 in a year. I’m not mad about the loss; it was play or better defined gambling money. But, I’m only giving myself one last chance to play the short term trading game. I’m a business owner; I have a good career and investment plans with an advisor. I’ll be just fine if this does not work. Heck, that might be my downfall. But, I also have something to prove. I have desire. And it’s time to prove myself.
My Rules:
Short term:
Tight stops 10% or less on options 2% on stocks
First pick bad news stocks and buy a PUT.
Additional picks do the same as above or follow the direction of the market and pick up or down.
Don’t chase stocks.
No need to trade everyday.
Profit goal 20% or more on options. Ride the winners, but if it’s on the edge and I’m uneasy take profit.
Long term:
Buy a stock going up.
P/E no more then double growth rate (five year)
2:1 Assets/liabilities
I prefer less then 50 million shares outstanding
EPS growth every month
More cash the better
The plan: I will use $200 for my first trades and keep profits to cover any losses. I will grow the base trade amount over time, but allow it to become a smaller and smaller position size as a percentage over time.
