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Getting Started
Started:October 30th, 2013 (02:22 PM) by perionan Views / Replies:1,611 / 12
Last Reply:October 13th, 2015 (03:59 AM) Attachments:0

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Getting Started

Old November 1st, 2013, 06:21 PM   #11 (permalink)
Elite Member
Dallas, Texas
Futures Experience: Beginner
Platform: TOS
Favorite Futures: IWM Options
Posts: 175 since Oct 2012
Thanks: 417 given, 90 received

shodson View Post

I meet a lot of new and wanna-be traders through my Meetup and here is the advice I lay out, with a little math

Let's say you have a lifestyle of $100K per year. The best traders on average have annualized returns of 10-20% a year. That's annualized. That means some years they may be up 50+%, other years down 40+%, but on average, over time, they make 10-20% a year. Let's be optimistic and say you can actually annualize 20% a year. That would mean you would need 5x capital, or $500K of trading capital to start with assuming you use good risk management.

This also assumes that when you have down years that you don't spend any of your trading capital, you just don't get a paycheck from your trading, so you'll need some other savings to pay for your drawdown periods. I'd guess that would mean you need another 1-2yrs of savings on hand. So now we're up to 600-700K. The reason this is important is that you must not spend your trading capital in drawdowns, because it will make it harder to recover from your drawdowns with a smaller and smaller account size.

With all of that said, this all assumes you actually have the skills and discipline to make 20% annualized. If it's only 10% then you need 2x that capital. While your attention-to-detail skills will be very helpful, it's only one tool you will need to master. Deciding to becoming a full-time trader is like deciding to become a doctor, a lawyer, or play professional sports. You can't just jump in and expect to be successful just because you are smart, work hard and are determined. It takes a lot of work and practice achieved over time. You will probably blow out 2-3+ trading accounts on your way because you have not yet mastered the skills needed, so you'll need some "tuition" money to lose on the way. It will probably take you at least a few years to get where you need to get to.

Enjoy the journey and try to minimize your tuition losses on the way.

Thanks for your comments. I have heard other traders on here mention the same thing. IMO day trading futures would not be worth the effort or time for 10-20% annual returns. Just curious if other consistently profitable day traders concur with that.

I have also heard about "blowing up a trading account". I come from more of fundamental investing background and have never experience that. Just seems reckless to me, because a what point does someone say hey I need to re-think my strategy? BTW I have lost money on trades but I have usually been able at least work my way back to cost basis with options.

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Old November 1st, 2013, 09:24 PM   #12 (permalink)
Elite Member
Buenos Aires / Argentina
Futures Experience: Intermediate
Platform: Tradestation
Favorite Futures: YM
Posts: 15 since Oct 2013
Thanks: 46 given, 14 received


Thanks Mike!

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Old October 13th, 2015, 03:59 AM   #13 (permalink)
Trading Apprentice
Nagpur, Maharashtra, India
Futures Experience: Intermediate
Platform: Amibroker, Ninjatrader
Favorite Futures: Nifty Index Futures (NSE)
Posts: 29 since Oct 2015
Thanks: 4 given, 10 received

Hi there, its nice to be here!

Dear All,

I am trader for almost a decade now. I have tried many approaches to trading an analyzing the markets.
Like most of the beginners I started by reading the classical technical analysis book by Edwards and Maggie, even though the book covers the approach in great detail, like a novice I only saw what I wanted to see, and made some rash decision in the market.
And that's where my journey into the world of technical analysis began. I started jumping from one approach to another, one book to another, one trading method to another.
I tried all the indicators, black box systems, and the like, usually with predictable results, losing money and learning something new every time, adding to the long list of Dont's, as I had not started making money yet.
But then I started to understand that trading is not only about indicators, it is as much about your understanding of yourself as it is about understanding the markets.
Gradually i came across more advanced approaches like Elliott Waves, VSA, Market Profile, Neowave, Wyckoff, etc. My understanding of the markets and myself have expanded since then, and things like losing trades, which used to frustrate me, now I understand that it is all part and parcel of the game.
I have incorporated money management techniques along with some strong risk management principles to make my trading safer. And learned trade management to ensure I don't jump the gun, against my analysis, because of some temporary adverse movements in the markets.
I have joined with an agenda of learning from its members while contributing in whichever way possible from my side.

Looking forward to some great insightful interactions.


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