First of all, this is more about mental management than money management. The mental part of it is much harder to master than the mechanics of the money part. In fact, what worked for me the best was the most simple money management strategy that I could come up with. I did not know for sure how successful it would be, but I did know that anything would have to be more successful than what I was doing.

Now to be sure, I did not make this up myself. I took what I had learned, heard, read, or subconsciously absorbed and came up with this. For the most part it has changed it very little from the very first day I started using it. What has changed is my attitude towards how I apply it.

I always thought that I knew why I was a trader. The obvious answer is, to make a lot of money. That is about as much thought as I put into it because it was so obviously why I, and everybody else, wants to be a trader. The stories I’d hear about people making lots of money would have me salivating to do it too. I just knew I could do it because I had always been successful at whatever I had done. I just wanted money, money, money.

Sometimes you have to stand back from a problem or situation and clear your mind so you can take a fresh look at it. For whatever reason one day I decided to rethink my trading career and specifically my relationship with money. I asked myself a serious question.

• What was I trying to accomplish?

After some thought I realized something very surprising to me. Money actually had nothing to do with the question I was asking. Money is so tied into everything to do with trading it begins to be all you think about all the time. But when I thought about it, money actually had nothing to do with it for me. Money is simply the result of the answer to the question.

I like to use sports analogies so here is one to illustrate my point. When a professional football player goes out to play a game, what is he trying to accomplish? From the minute he steps on the field is he thinking about his paycheck or signing bonus? Is he thinking “if I just make this one block I’ll make more money” or “If I catch this one pass I’m set for life”? Probably not. During the game, a professional athlete is thinking of only one thing…winning. That is all he is trying to accomplish during the game. In fact his focus must be on that one very important goal, or risk losing the game due to his lack of focus and discipline. Think back on the career of your favorite professional athlete. Did he play like he was playing for the money? Was he the leader of the team or a distraction to the team? You will notice that when you see a player that moves from team to team that has a huge amount of skill but a less than stellar career, money is always part his story. He used his skills to become a pro athlete but could not maintain a successful career because he was in it to get rich and drive fancy cars and have lots of bling hanging from his neck.

What I really wanted was to learn to be really good at my newly chosen profession. I enjoy trading and I am fascinated with the intricacies of trading and how it can never be mastered. I respected and admired people that had the freedom to be traders and did not have to punch a time clock or answer to a boss or to their customers. I wanted the lifestyle that I imagined traders had.

So what I was really trying to accomplish was becoming a good trader. Being a full time trader had a mystique about it that appealed to me. When I closed my eyes and pictured what being a trader was like, I did not see any stacks of money in that picture. When I tried to feel what it would feel like to be a trader, I did not feel any money. When I pictured how it would affect my family and relationships, no money was in that picture either.

The next question I had to ask was:

• If I had all the money I ever needed and I removed money from this profession would I still want to do it?

Would I want to be a trader if money was removed from it? It seems the answer would be fairly obvious to this question. But that was not the case with me. I wanted to learn to trade and get better at it. I wanted to have the lifestyle that trading offered. I wanted the fulfillment of conquering something that over 90% of people that try it fail at. I wanted the challenge and mental stimulation. To me trading is almost like a video game is to my 16 year old son, but much better.

Additionally, I have always been a very competitive person. Most of my younger years I played football and ran track. Later in life I ran a construction company that competed for project contracts. Competition has always been a part of my life and a great motivator for me. To me it is always about wins and losses, not about how much I won or lost by. That did not really matter to me. I either won, or I did not, end of story.

With the answers to my questions, I set about trying to rethink how I approached my trading. If I could mentally remove money from my mind during trading, could I get over the hurdles that I seemed to keep tripping over? It was time to get serious about trading and start approaching it like a business and not like a hobby.

Although there is very little in trading that I can relate to my previous professional life, there are a couple of things that apply very well. Rules and training. So that was the first order of business for my new chosen profession. Create a set of rules regarding how I deal with money and then train myself to use them. Piece of cake.

Writing the rules took about 30 minutes. Actually learning to make the rules a part of my trading life deeply ingrained in my psyche, just a little longer…..several months longer!

The Rules:

1. Trade only one contract per trade placed for each $2000 to $2500 in my trading account
2. If more than one market I was trading had a good set up, I would take both but with a single contract on each.
3. Account must be grown to next level to proceed with additional contracts. Deposits into trade account do not qualify for additional contracts. I must trade my way to the next level.
4. I did this to help myself stay focused and disciplined on becoming a better trader and not just finding a way to increase my account so I could trade more and make money faster.
5. Withdrawal from the trade account is considered the same as a drawdown in the account. Not always the best thing, but occasionally necessary. If funds replaced into the account within 10 days of removal, then I could count those funds towards my account balance and goal to next level. If more than 10 days, I had to trade my way back up and not account for funds returned.
6. I did not want to have to trade my way back up to the previous balance so this rule kept me from getting stupid with the money in my account. I had to refer back to this rule often when I wanted to splurge on something and I knew I could get the money if I really wanted to.
7. Do not count my money on a per trade or day basis. Trade to be a winner, not a rich or financially independent trader. Do not count dollars or ticks but wins and losses.
8. This was a biggie for me. Trading is all about money and always had been for me. Thinking in terms of wins and losses was difficult at first but became much easier the more I did it. My mind was so used to counting dollars that I was always doing the math in my semi-subconscious and telling myself how much I made or lost that day. Training that away was tough and I was not sure that I could do it. Now it is second nature to me and removed a lot of obstacles that had been keeping me from becoming a good trader.
9. When account has grown steadily for a minimum of 3 consecutive months, auto transfer enough funds each month from trading account to pay 1 monthly bill. Each consecutive 3 months of account growth add another monthly bill to the auto transfer amount.
10. I did not really know how to know when it was time to start taking money out of my account to pay my bills with. Doing it all at once on the first month I decided to do it was a scary concept to me. So I just took one bill and made it the responsibility of my trading business to pay. It was a very small one but I paid it out of my trading account earnings every month. In my mind it had been removed from my personal expenses and added to my business expenses. I did not add another bill until I had 3 months of consecutive earnings. If I had a down month, the calendar started over. But once the expense was transferred to the business, it was always the responsibility of the business whether I had a good month or bad.
11. Trading is a job. Paychecks come at the end of the week and not until then. Friday afternoon at the end of the day, open the paycheck and see how much you made.
12. Kenny Rogers said it best, “You never count your money when you’re sittin’ at the table. There’ll be time enough for countin’ when the dealin’s done.” If you are counting money, you aren’t concentrating on your job. Emotions are going to trip you up and cause you to make mistakes that will end up costing you far more than that one trade or that one bad day did.
13. Set a daily goal for number of wins or losses.
14. Initially for me that number was a big fat 1. Previously I had days of huge wins and the next day a huge loss followed by a small win and then another huge loss. I could never seem to get any traction established as a winner. I had very few consecutive days in the win column because I always managed to keep trading until I lost most or all of my earnings. If I could just see a few weeks of consecutive wins I knew it was all going to be ok. That had to be 1 net winner per day. Meaning if my first trade was a loser, I had to win the next 2 to be a net winner for the day. This created a whole new level of focus for me on each and every trade. It was right about this time I stopped saying to myself, “…just to see what happens” as my justification for entering a trade. A single losing trade meant that I had a lot more work to do to make it up. The more consecutive days I had as a winner, the more I wanted. Eventually I was trying to see how long of a streak I could have before having a losing day. I had forgotten about the money. I just wanted to add to my winning streak.

For more from Tony, please visit The Intentional Trader .