I have posted a sign by my computer. "Corrections WILL COME at least once a year, most likely twice. . ." Meaning that there are areas of opportunity (or disaster) that will visit our desks at least once, but most likely twice, in any given year. Whether its an opportunity or a disaster depends upon you... I did like the threshold strategy that someone had posted in another thread which basically states the following. Lets say for example you have $100,000. You do your short-term trading with the 100,000 and then you get it up to 125000. You then take away the 25000 and wire it out of your bank account to another seperate account and use it in another strategy. So you just made a successful short term swing trade with Yahoo. Your Etrade account is now up to 125000. You wire out that cash to your Vanguard account where you sink it into a balanced mutual fund or some longer-term buy&hold stock like McDonalds. That way you safeguard your profits, but you can still turn a dime on the profits made through longer-term strategies which carry less risk.
I beg to differ. I try to optimize my return on trading capital by keeping my money in my most successful systems. Unless I expect a better return with another strategy, I keep compounding my profits. In a way moving money from a very successful system to a lower return one, is like taking profits too early in an individual trade. The power of compounding is remarkable. Now , if you face the issue (a good one, mind you) of having too large capital in a single system, influencing the bid/ask of the individual stocks traded, then I would "diversify" by adding new systems, based on the same ideas, but with the result of increasing the number of individual stocks traded. But I agree that those decisions have to be in line with your psychology. If moving profits from one account to a lower risk account works for you, psychologically, then it is the right thing to do, even if the overall return is less. This is what I learned. To be profitable, one has to trade according to his/her psychology. One has to sleep at night !
I agree with keeping cash in successful systems. The only thing is that Im not completely sure when the successful systems will turn unsuccessful. It could be next week, next month or a few years. While I have my charts and all of the different methodology, its hard to say when the turning point will come. I do know that the Wellington fund has averaged 8% a year since 1929. Someone asked in another thread what money would we use if the market did not go our way. The simple answer is to keep a slush fund in a low-risk system and contribute to it dutifully each week as insurance.
I track every single trade in an Excel spreadsheet and make charts with it. I can tell fairly quickly when a strategy is failing and stop trading it. If I make a profit, I take out 25% of it. The 75% pays for my loosers. That way, me being a beginning and lousy trader, I still have something to show for at the end of the month. My account becomes a money machine. I got various stops (trade stops, daystaops, portfolio stops), I have adhered to them all this year. That has kept me afloat.
Response to O.P. question: That there are very few elite traders in the Elite Trader community. Mostly garbage posted here by a bunch of twenty-something wanna-be/pie-in-the-sky lemmings. Still are suckers born every day, and coming to this site only bolsters the confdence of the real traders that are making it day in and day out.