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The Intermediate Trader

The minimum acceptable performance level for an intermediate trader is an annual portfolio return of 2x the current rate of risk free investments. At this stage, you should be able to cover all your trading expenses and be able to make twice the amount from risk free investments. You should now have a clear idea of money management and no longer be interested in chasing after stocks that are overly extended. Even if there is a hot tip from friends and family, you will always analyze before taking on any position no matter how good the rumor is. Exploring further into technical analysis and setting your trading criteria will further improve your results.

The goal for an Intermediate Trader is to generate a 20% annual return on equity. You should begin to see that your portfolio growing at a steady pace every month. The danger at this level is over trading. Many good traders have suffered losses because of over trading. Do not attempt to make unrealistic returns on your investment by over trading or taking on aggressive positions. Continue to stick to your trading approach and money management skills that have brought you this far.

With proven success at this level, you can now start to add more money into your portfolio for higher profit. Intermediate traders who attempt to move to full time trading usually make the mistake of turning full-time with an undercapitalized trading account. A small trading account will put pressure on traders to trade more frequently which is a potentially disastrous move. A trader who can churn a healthy annual return of 20% on a portfolio of $100,000 is still not good enough to turn full time. Ask yourself – are you able to survive on a $20,000 profit a year? There is only 2 ways to improve your profit in this scenario. One – increase your annual return (this is when the danger of overtrading steps in). Two – increase your portfolio size.

Holding on longer to your winning trades, increasing your win/lose ratio, and cutting your losses faster would be among the ways to further increase your returns. Do not attempt to force new trades when your trading criteria are not met.

As you improve in your trading skills, continue to increase your savings to further increase your trading account. Before long, you will have enough skills (which should translate to higher return) and a large enough portfolio to turn into a full time trader.




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