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Setting Aside Stock Market Trading Capital | Financial Planning Tips

Setting Aside Stock Market Trading Capital

There is one important thing that you must follow if you are going to start stock market trading. This is very, very important for your own well being. If you have a family, this is all the more crucial. That is don’t trade with money you can’t afford to easily lose.

Trading is very risky and if you intend to making a living this way, you need to be smart about how you go about it. Find a financial planner to help you figure out how much you can afford to use to do something risky like trading.

Remember, trading and investing are two different things. You should be investing for your retirement. Stock market trading is what people do when they want to get rich fast.

You can lose all of your capital in a matter of a little time if you aren’t careful. Transaction costs alone can eat up your returns so be wise with your money.

Successful Traders See Their Capital As Points In A Video Game

The most successful traders report having a disconnect with the money they use to trade. They look at it as points in a video game. They don’t look at it as next week’s mortgage or today’s lunch. If they did, they would not keep a cool head.

There’s already enough pressure in the trading world. You will compound that pressure to unbearable measures if you use cash that you need for living expenses to trade. That is a huge mistake.

You have to lose gracefully. Otherwise, you will make bad decisions because it will affect your emotions so negatively that you won’t think straight.

I recall reading an article where the reporter asked the successful trader how he thought about his work. He said that the losing traders had an emotional attachment to the money. He said he didn’t. He saw it as merely points in a video game.

You Should Still Have An Investment Fund

Even if you are trading, you should have a separate investment account for your retirement. Don’t intertwine these funds.

A stock that is a good candidate for investing may not be good for trading, and vice versa. You have to put a firewall up between your trading capital and your investment capital.

Don’t tie up your retirement fund! It’s just that simple! It will demand too much of your emotional baggage and will cause you to trade poorly. Remember, the best traders in the world trade with other people’s money. That is the key to their success.

For more valuable tips on investing, check out this website. There are tons of great ideas and suggestions on there to help you on your way to investing and trading success!

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