I am afraid there are no clever options strategies or other strategies that will help in this case. I can comment that individual stocks offer better reward to noise ratios than the indexes, but you need to filter them so that you focus on high-beta or strong relative strength stocks. You also need to find a way to limit your downside - look at TTPH recently and think of ways of minimising the damage on that massive gap. In my opinion, if you have a smaller account, you should try to get big gains on individual stocks and not try to trade the SPY for smallish swings.
Try and limit the time you spend paper trading. I know it is a contentious issue, but the game does change when you put real money on the line. Some people feel it is better to lose with sim money, I believe that you need to feel real pain before you can advance as a trader. Trade with an amount that will cause you pain when you lose it, but never so much that it will cost you your lifestyle.
You're looking at this from the wrong angle. Your focus should be on risk rather than reward. Try and minimise the amounts you lose and let winners take care of themselves. Also, you are not going to get nice linear returns. In all likelihood, you will lose small most of the time until you manage to land one decent trade. Of course, there are others who do it differently by taking loads of small gains, but on a small account the commissions could eat you alive. Best you can hope for is that you land enough big winners so that they offset your losing trades and make some profit. This is not an easy ride by any means.
I am afraid that your comment is not entirely correct and your tone comes across as arrogant and disrespectful. If the OP wishes to daytrade, then sure, his account won't last long. If he is willing to trade longer term positions, while minimizing his risk and not relying on this account to live from, then he has a small chance. Proper capitalisation does not guarantee success in exactly the same way as undercapitalisation does not guarantee failure.
Granted, the OP has not used the search function properly and every undercapitalised trader should read your following post which I quote below, but it would be wise to remember that a) all of us started off inexperienced, b) most of us started off undercapitalised, and c) the market is very good at teaching all of us a little humility.
The following 5 users say Thank You to grausch for this post:
I have no problem and I can see that you are quite adept at choosing the tonality you deem adequate. As can be seen from your response to my post, when posting on forums the intonation tends to get lost. I was not attacking you, but you probably interpreted my post as such. I was merely gently reminding you that all of us started somewhere and all of us needed guidance at some point.
Therefore you should be able to see that when you type "lol" and laugh at someone being inexperienced and undercapitalised your message can come across as rude. I don't think Big Mike intended these forums to be used to laugh at others looking for guidance.
We have both given the OP and others useful advice and it may in the best interest of this thread and our own trading accounts if we let the current discussion go. Nothing to be gained from this anymore, but plenty of downside.
The following 2 users say Thank You to grausch for this post:
With 8k of capital the only choice is to swing trade equities (and ETFs). You can still trade ES (SPY), CL (USO) etc. Just expand your horizon, swing trade it. This is how I recommend to start anyway, even if you had 20k or 50k or 100k.
Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.
Need help? 1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first. 2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses. 3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make. 4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance. 5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers. 6) Help using the forum? Watch this video to learn general tips on using the site.
If you want to support our community, become an Elite Member.
The following 5 users say Thank You to Big Mike for this post:
Well it's been a couple months after I posted the initial OP. Some of the replies were seriously lol-worthy.
I've been following & trading the index through ETF, options and futures for the past 6+ months. After switching to only futures trading I've been doing pretty well.
Once I overcame the nervousness of holding a $100k contract, I became more comfortable holding the contract for a few days to 1-2 weeks timeframe and the money was rolling in.
I'm definitely loving trading futures more than options. Buying options, time is against you and I've probably lost as much as I've made. Shares of the SPY ETFs are also too expensive to lock in large gains. The most I've made was like $679 from 100 shares of SPY. If that was 1 futures contract, would be like $3200.
Now I'm planning to funnel some of the profits into a Roth IRA so I can eventually trade futures tax-free.
As one who has made all the mistakes you've made and about to make, I will try to chime in to guide you on the narrowest path possible.
Stop focusing on your profit. Good performance will take care of your profits. You need to start looking at things in terms of probabilities. So you only made $679 from 100 shares of SPY... ok. What was your risk on those trades? If you look at your success and failure of your trading one-trade-at-a-time you will be emotionally screwed and most likely financially screwed as well.
I really really really really recommend you youtube some Mark Douglas videos (the one where he's interviewed by wizetrade) and watch it repeatedly until you understand what he's saying.
If I were you, I'd
Step 1: trade 10 shares of SPY until I know exactly what I'm doing and have at least 100 trades under my belt following a method (not just random clicking). Look at the data. Do you have an edge? Are you profitable?
Step 2: If step 1 is successful, I would slowly up the number of shares to maybe 25 and prove to myself that I can follow my plan and method even with the increased mental pressure of more shares.
Step 3: If step 2 is successful and I proved to myself that I have an edge and trading about 1000 shares, I would graduate to 2 lots of ES.
This probably isn't the kind of answer you were looking for and you will do what you will regardless. I tried.
Nothing in life is to be feared, it is only to be understood. Now is the time that we understand more, so that we may fear less. - Marie Curie
The following 2 users say Thank You to fminus for this post: