New "Cash Out" Strategy

Yesterday I started reading The New Market Wizards: Conversations with America's Top Traders by Jack D. Schwager. I'm just over 200 pages in - a very good read so far.

Something I've been thinking about is how I can continue to grow my account at a rapid pace while managing the risk of total obliteration. Awesome gains are possible in the futures market thanks to the amount of leverage you can use - but leverage works both ways. A bad trade can totally sink you if you are overleveraged.

One trader in the book started his first account with $12K and grew it to $250K over a four year period - only to then lose the entire balance in 4 days. This was a common theme in the book - great traders learning their lesson about leverage the hard way.

So my new strategy is to put away a set percentage of gains. For the near future, for every $15K in gains, I plan to put $5K away. This will leave me with $10K in gains to leave in the account and leverage as I like - while still having $5K in the bank to pay taxes with and save for a rainy day.

I am a strong believer in the commodity bull market, and I think it has at least another 10 solid years to run. So I want to make sure that I'm in the game for the next decade! As tempting as it is to leverage up as much as I can to make millions, I need to control this so that I am not wiped out by a sharp decline.