Growing the bank

When I started my blogging journey my principle aim was to improve my discipline in trading. My chosen vehicle was compounding (hence the url of this blog, even though the blog's name has changed). The idea was that by consistently making small, regular profits that my bank would grow steadily.

I no longer aim to win a certain amount, neither a sum of money nor a percentage of bank but I still think that process put me broadly on the right road. The reason for veering away from the compounding idea was basically that it isn't a sustainable long term strategy for growth - put simply the numbers  grow too large too quickly in the medium to long term and too slowly for an impatient bloke like me in the short term!

That said, it is a basic truth that a trader's bank is his / her main business asset and therefore needs some kind of plan to underpin it. It has been written often that one should not use money to gamble with that one can't afford to lose, and I think that is eminently sensible advice. But it's naive in the extreme to think that losses aren't going to come your way, no matter how good your analysis and your ability to seek out value trades, so some sort of bank management is needed. I trade principally for the fun and the challenge, and my main financial aim, believe it or not, is not to have to top my bank up!

The subject of growing / managing banks has come up recently in two of the blogs that I read every time they are updated. Sultan has expressed his desire to grow his bank over the forthcoming tennis season to five figures, the better to enable him to cope with the slings and arrows of outrageous fortune as he tries to put himself in the position to trade professionally. I wish him well with that aim, although I wonder if that amount of bank is really needed to trade professionally.

In reply to a question from Bet19 and others, Cassini advises that people should aim to grow their bank and leave it alone  - neither needing to draw down from it or to top it up. A sort of 'retirement fund' if you like. I do wonder, as an aside, whether he genuinely has not withdrawn anything from his account - if it were me paying a 50% ish tax on my winnings I'm fooked if I'd leave 250 large in Betfair's coffers with no consideration in my direction at all!

Bet19 adopts a two bank approach. He has a 'short term' bank and a 'medium / long term' bank. I did something similar for a while a few years ago, but I'm sure Bet19's approach is more disciplined than mine! I had a day to day account, from which I'd siphon any winnings over a certain size into what I had somewhat optimistically christened my 'SpecToAcc' account (seriously, that was how the relevant spreadsheet area was named!). Lets just say there was considerably more speculation than accumulation going on there so the idea was swiftly ditched!

The point I'm labouring somewhat to make is that as with many things in life bank management is horses for courses to use an appropriate idiom. If you wish to live day to day, supplement your salary or build a nest egg for the future you need to have identified your goal, and to have worked out a method that works for your trading style, preferred sport(s) and time available. And stick to it!