SHARPE INCOME … And THAT is Why Short-Term Traders Need an Income Account

Posted on May 11 2015 - 2:20pm by Sharpe Trade

The original Sharpe Income post can be found here.

The Sharpe Income category be found by clicking on that red ‘Sharpe Income’ tag next to this post title, or by clicking here.

We continue the discussion from the last entry.

We said it in the very first entry in this project.  The link is at the top.  Check it out.

Short-term traders should not, and professional short-term traders do not depend on their trading account for their monthly income.  This is a myth commonly believed and perpetuated by new self-directed retail traders.  If you attempt to take a monthly income from a short-term trading account, then you’re either collecting fees for assets under management, or you are a fool, a liar, or both. 

Notice that we did not say that short-term trading is impossible.  I have demonstrated profitable short-term trading, publicly, for years.  We dilineate that we are discussing from whence you draw your monthly income.  As stated, without collecting fees, using short-term trading to generate montly income becomes a mathematical impossibility.  This is why traders at firms charge fees.  Or …. like us … you have your own personal Income accounts.

Bills come due every single month.  If you are living debt-free, and your net worth is over $2,538,000?  Guess what? 

Your bills will still come due every month. 

The bill for your electricity.  The bill for your cable and internet.  Your bills will not wait for you to come out of a period of draw-down.  Taking regaular withdrawals from your short-term trading account places an immediate negative drag on any account.  Couple this together with regular periods of draw-down that any professional faces?  Such as the one I’m experiencing?

Yeah … that’s why we believe short-term traders need a separate account, whose sole purpose is to generate monthly income. It also has the ancillary benefit of relieving psychological pressure on your short-term trading.  If you gain total portfolio gains of 173% over the course of a few years and subsequently experience 11% drawdown?  You don’t have to worry about how soon your next trade will be placed.  You can approach your short-term trading with more patience and discipline.

We use this space each Monday, to demonstrate how to grow an account into one that can pay you an income.

‘Sharpe Income’ Actions This Week

Last week, we began to include a few charts onto the PDF to demonstrate how things are progressing, visually.  At the same time, we have also spruced up the reporting for each individual asset used for income.  You’ll notice this on the attached PDF below..

Capital Gains Strategy: As you we did last week, you will see we send a bit of the capital contribution this week to beef up that section of the project.  As a matter of fact, we may have an opportunity to put the capital gains strategy on … en totum, in coming months.  We’ll have to see what the markets deliver to us.

Remaining Cash after Reservations: This is the section of our cash that we will use for the usual purchases. As you know, at least at this stage in the game … our approximate size of a purchase for the project runs about $300.00. So we have to build this section up to at least that level, in case an opportunity presents itself. This week, the majority of our deposit was diverted to this category.

The link to the Google Drive Spreadsheet that you can view, that we will edit, build upon and refer to over time can be found at this link.

We continue the Sharpe Income project with this next entry.

The Sharpe Income PDF breakdown for Week 24 can be found here ….

2 Comments so far. Feel free to join this conversation.

  1. Investing Pursuits May 11, 2015 at 11:33 pm - Reply


    Great post. I like the link “traders at firm charge fees”. That was exactly what you said in some videos, which is to not take money out of the trading account and to have a separate account providing income or another source of income such as a job

    • Dan Shy May 12, 2015 at 9:49 am - Reply

      Thanks. Yeup. It’s something every professional trader knows. Anton put it very well …

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