Build Your Capital for Stock Trading

I love system. Whatever I do, I want to see it happening in a systematic way. When you have a system, a good system, what you need to do is to strictly follow it. I made my own trading system. Before buying stocks, it has to go through a series of requirement before I am allowed to buy a stock.

I would like to introduce a money system on how you can build you capital for your stock trading.

If you have read my post of position sizing, it is clear that you need a rather big capital (C) in order to stay alive in the market. As you limit your risk (R), you can only be allowed to trade limited amount of shares (again, it is a position sizing system). So how can you build your capital?

Here is my money system.

#1. I strictly believe you should spend your earning AFTER saving! I mean when you get your salary every month, quickly distribute it (automatically) to a series of saving buckets. Do this religiously. When I started working, I have 4 criteria of savings: short term savings (to be used within one year - vacations), long term investment (retirement, kids educations, practically anything I need to spend my money more than five years from now), emergency fund (you wont know when you are out of job, or when your loved ones fall sick), and investment savings (this is for your stock trading and any investment-related).

My shares: 5% - short term, 5% - long term, 5% emergency and 10% investment. And do not get surprised, I have different bank accounts for each of them.

#2. Short term savings will be used in near future, so I don't really monitor it. However, for the other three, I create an excel sheet to monitor it monthly. If my "ideal" amount doesn't match my real savings, I will do re-balancing, QUICKLY.

#3. If you do it religiously, your investment savings will increase in no time! (Okay, it took me 6 months to be able to buy 1 lot of stocks).

So ask yourself, do you have a system for your savings? If the answer is no, make one now and share with me :)