Happy 4th of July everyone!
I know the markets are closed today…
…but if you’re like me, reading about stocks and working on trade ideas doesn’t seem like work. And sneaking a few minutes to stay fresh, even holiday, is okay in my books.
That said, I want to talk to you today about a topic that should be very interesting to you:
Scaling Up – Getting Bigger – Making More Profits
(I’ve averaged over $1M in trading profits for the last four years running. My latest training explains some of my best strategies in greater detail… you can watch it here)
You see, some may call my rise in the trading world as meteoric, I’m nearing in on $7M in career trading profits before the age of 30.
My first trading account was funded with $15,000…
…now I have individual winning trades greater than that amount…
(Less than two weeks ago I had a $22K winner in BPMX, that’s more money than I had in my trading account when I first started a few years ago. To learn more about how I find trades like the one above, click here)
That said, people often ask me how long will it take until I start sizing up my trades and scaling up…
Read on to find out what my answer is to this all-important question.
Now, there are two ways to scale up:
- Learn more strategies.
- Trade more shares or options contracts.
But the problem with scaling up is knowing when to do it.
A lot of traders like to jump the gun and actually start learning multiple strategies… thinking the more they put into use… the more money they’ll make.
However, that’s not the way trading works.
Just because you have more strategies, it doesn’t mean you’ll make more money… in fact, it could actually be detrimental to your trading.
For example, if you have a few strategies… but none of them work well, you’ll actually lose more money than you’d expect.
There’s a quick fix for that… but before we get into that, you need to start thinking in relative terms.
Thinking in Relative Terms
When you’re trading, thinking in relative terms matters.
In other words, how have you been performing based on your own account, risk limits, and personality?
You see, every trader is different and it doesn’t really make sense to compare someone else’s performance to your own… we’re all different and I might be able to take on more risk than you… or you might be able to take on more risk than me.
Think about it like this… let’s say you make $25K trading one year… and you started with a $25K account.
While another trader made $50K trading one year… but started with a $500K account.
Who performed better that year?
From a percentage standpoint, you… because you returned 100%… while the other trader just returned a measly 10%.
Moreover, let’s say you actually had a high win rate (you won on 70% of the trades you took)… on the other hand, the other trader had a low win rate (they only won on 40% of the trades they took).
When you think about trading in relative terms, it actually helps you realize when you should scale up.
For example, if you’re making money, but have a low win rate… it’s probably not the time to scale up. However, if you have a high win rate and have proven you can make money… well, then you can make the argument that it’s time to scale up.
Now, the quick fix I mentioned earlier: journaling and analyzing your trades.
How to Figure Out What’s Working
Now, just because I’ve developed new strategies, it doesn’t mean I’ve stopped looking for FDA Insider Alerts plays… in fact, I actually still use it to pull winners from the market.
Now, before I actually started to scale up this strategy, as well as find other strategies… I journaled all my trades and analyzed them.
Basically, whenever you have a trade you want to write down:
- What the strategy was.
- Your edge in the trade. (What was your advantage? … Do you know of a chart setup or catalyst that has proven to win?)
- Your Profit or Loss. (How much did you make or lose in the trade)
- Your entry price, exit price, stop-loss area.
- Did you stick to your plan?
After you’ve had some trades using a specific strategy… you need to go back and review those trades.
One quick way to do that to find the average of losses and compare it to the average of winners.
For example, let’s say you find a strategy you like and start out trading small, relative to your account size…
… and after you’ve taken a steady stream of trades using that strategy… you find you’re using actually has a high win rate (say 65% – 70%). In other words, when you take trades based on that one setup… you win about 6 – 7 out of 10 times… and you’ve proven that you can actually make money using it.
Now, once you’ve figured that out, you can start to scale up the strategy. For example, if you start out trading 100 shares… you can bump that share size up by 25%.
Thereafter, you would do the same thing again… journal and review.
Once you’ve proven that scaling up on that strategy has worked for you… you can bump up your share size to 50% of your original position size, and so on.
The goal here is to maintain consistency and get comfortable with the new trading size.
If you find that scaling up hasn’t benefited your trading… you can always take a step back and go back to the original position size that you found success with.
You see, there really isn’t a limit to how much you can make in the markets when you follow an approach like this.
Proved You Can Make Money After You’ve Scaled Up… Now What?
If you’ve found success scaling up on that strategy, then and only then, you can start to look for other strategies.
For example, it wasn’t until I scaled up with my FDA Insider Alerts trades that I started to find other profitable strategies… like my Sniper Portfolio strategy.
Now, if you haven’t found a strategy that has been consistently working for you… that’s okay too. If you found that you’ve taken dozens of trades using one setup, but found it hasn’t been working for you…
… then it might be a good idea to cut that losing strategy and find strategies that have been proven to work.
Once you do that… you’ll start the simple process all over again. Start trading small relative to your account size, journal and review your trades. If the strategy is working, then you can start to scale up.
If you’re struggling to see the markets clearly, and looking for new strategies that can help you achieve success trading stocks and options… click here or below to learn how to jump start your trading on the right foot.