An old adage in personal finance says that you should “always pay yourself first.” When this phrase was first coined it referred to setting money aside for retirement as soon you got your paycheck so you wouldn’t be tempted to spend on something else. It holds a similar meaning in trading, but with a slight variation.
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Topstep Funded Trader Sarah S. had a good day picking her spots in the Nasdaq and put up a solid $1,800 gain!.
Always Remember To Pay Yourself
To “pay yourself” in trading means to cash out a little before giving it back to the market. All the paper profits and unrealized P/L don’t mean a thing if you’re not taking anything off the table. While it is important to gradually grow your trading account over time so you can increase your size, it’s also important to be realistic about what your trading goals are. For instance, taking out half of your profits every month is one of the most basic formulas for paying yourself while still growing your account.
A common pitfall for new traders is putting on a position that they normally wouldn’t be comfortable with just because they have some extra money in their trading account. If you find yourself in this position, then maybe try withdrawing money on a weekly basis until you’re more confident in your ability to maintain discipline and proper risk management.
Trading should be approached as a business. Account management is just as important as risk management. Another tip from our coaches is to have a second source of income so you don’t have to rely on trading income to survive. When you depend on profits to pay the bills, you’re putting yourself in an awkward position to have to make money every day just to get by. As we all know, most traders don’t win every day, and in a do-or-die situation you will most likely find yourself putting on trades you normally wouldn’t.
Always trade for tomorrow!