Keep brokerage account small? | Psychology and Money Management


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Keep brokerage account small?

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Keep brokerage account small?

If there is a thread on this topic, please direct me to that.

Is it considered wise, or even necessary, to keep the amount of money in your brokerage account to a minimum? In other words, let's say your "trading account" (money used strictly for trading) has grown to $50K-$100K. Do you keep that all in your brokerage account? Or, do you keep the minimum necessary to meet the margin requirements of the type and number of instruments you trade so that if you somehow blow up the account, you only have that amount to lose?

I originally traded futures before many of you were born and in those days it didn't matter because if you lost more than you had in your account they were coming after your house and everything else anyway. In those days there were only the historic commodities like orange juice, cattle, soybeans, etc. The market, especially some instruments, would occasionally get bad news and "limit down" which meant the exchange closed trading on that instrument until stability resumed so you couldn't get out of a contract until the exchange reopened trading on your contract. And when they did, you could find yourself down tens of thousands of dollars and, unless you were wealthy, you were bankrupt.

Nowadays it seems that most brokerages close your account if your margin and positions exceed the account, or if you happen to be holding on to a deliverable contract. So, if something were to happen like the internet and phone lines went down and you couldn't close a trade, it seems like that's when an account gets "blown up" and your loss is whatever you have in your account.

So, on that basis, it would seem prudent to keep the minimum amount in your brokerage account and the rest in your own savings account at home and transfer money back and forth as needed.

This is just something I've been thinking about and would appreciate the input of the more experienced traders here.

Thanks!

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