“Because I don’t have enough money on my trading account to hold positions on longer timeframes and to meet my broker’s overnight margin requirements”. I heard this today, and it is the worst and most self-destructive answer you can give to yourself as you go about answering the above question.
If you don’t have at least twice or better, three times the overnight margin on your account, you don’t have enough money to trade professionally anything on any timeframe, period. Use our calculators to find out how much you need to do what you want to do. Pay close attention to the cell “Largest probably losing streak” in our Capital Requirement Calculator. In trading, what can happen, will happen, it’s just a matter of time. Your account size must be able to withstand the worst-case scenario, just like the seatbelt or the airbag in a car. Of course, we hope it’ll never be used, but it surely must be installed!
Remember, the purpose of trading is, contrary to popular belief, to stay in the game. If you can do that, the rest will take care of itself. Staying in the game means trading with an edge and managing your risk. And that’s where most beginning traders trip over.
In any case, our focus here on short-term investing (because that’s what trading is) doesn’t mean there is no need for or you should not also have long-term investments. Of course, you should. Real estate, Michelangelo paintings, index funds, nothing wrong with them, so keep piling them up!
It’s only that here, the focus is on the short-term cycle of cash > position > back to cash.
Although you’ll want to think of it this way: cash > enter lion’s cage > back to cash.
One thing we know: what you’ll never want to do, not against the almighty market, is act like our hero, at 2:35.