I’m a trader.
I love buying an asset.
Watching it run higher.
Selling it later for a profit in my trading account, let’s say, for a 15% gain on my money in just a month or less.
Unfortunately many times, those who are new to the markets watch traders and think that this is how we pay our bills each month.
For many of us, it’s not.
As we have said for years, living and paying your bills from a trading account is very, very difficult to do so. Therefore, it is wise to have something else that pays you an income. Other professional traders have spoken about the need for income as well. If you take money from your trading account to pay bills, then it’s like taking a loss in your trading account. At the same time, it builds a ‘pressure’ in your own mind as to how your account must perform …
Holy smokes, I’m down this month and here comes the mortgage payment! I have to find some trades !!
That’s a spiral of behavior, that trust me, you don’t want anywhere near. It only exacerbates a very real phenomenon known as ‘Gamblers Ruin’ although that specific concept has a variety of meanings. Specifically, I am referring to the mathematical probability that one is leaning towards Mathematical Risk of Ruin. You don’t need to know the math per se, but it’s there if you want to reference the mathematics.
But it’s also common sense.
If you try to play a game with a supply of capital (the cash of your trading account), and you are causing a ‘drag’ on that capital (taking money out to pay bills) … you are increasing your chances of finding a string of losses in that game (a naturally occuring string of losses in trading), and then also needing the drag of income (to pay bills) yet again, causing a catastrophic loss to your capital (your trading account).
So I do believe that every trader, no matter who they are or how they trade, could only be benefitting themselves to look at having a fixed-income account, or at least start to build an income account so that eventually you have an account that pays you each month and every month. It takes a tremendous amount of pressure off your trading performance.
But rather than repeat everything that is mentioned in the above links, suffice to say that this is the reason that we here at Sharpe Trade are going to feature a service of free content, featuring, building such an income account!
This will be free. We will charge nothing for this service. We believe it to be that important. We will primarily release information on the “Sharpe Income” on Mondays, although we may make maneuvers in the account at any time during the trading week.
We also wish to demonstrate, that anyone can do this. You can start out, with only $500, add only $25.00 a week, and over time, with persistence, with patience, build an account in the markets. And that’s precisely how Sharpe Income will start out. $500.00 and the cost of a trip to the store to pick up some snacks. Anyone should be able to do this.
For the purpose of this Model project for Fixed Income, we’ll consider the commissions as being $6.00. That’s pretty industry standard. Tradestation and other brokers charge less. Even less with someone like Interactive Brokers. But we’ll just settle on a round $6.00 for our assumed commissions.
The performance will be tracked in a Model Portfolio, that will be updated, each and every week.
As well, we may use some ETF’s, in the commission free program that many brokers now offer (Sharebuilder, TD Ameritrade and other brokers) as part of their program. Usually, for these programs, you have to sign up (for the purpose of this model project, we’ll consider this account as having ‘signed up’) and any ETF’s bought in that commission free program have to be held for at least 30 days. Since this is equity fixed income, that should not be a problem.
We later added this addendum to the rule-set of this project.
This Monday? We don’t have any orders out there at the moment to pick up some more for income. This is simply the announcement of this service. Stay tuned, because if we enter an order for our own personal income accounts, we’ll talk about how that would affect this Sharpe Income model account as well at Sharpe Trade, and plot out the progress for you.
We continue “Sharpe Income” with our next entry that you can find here …