$5M might be more than plenty for you to go to firms with Private Banking and they will provide you access to options that are not available to many of the members of this board unless they have assets in the millions ... or in other words, have someone who is performance based (2+20) manage your money full time ...
if you want to learn yourself because you are bored or feel the allure of trading, then $1M is more than enough, and I would start out with equities first via someone like Bright Trading out of NV and do it FT for 6-12 months.. then just go out on your own office at home or anywhere and trade.. at that level of capital, you have options... lots.
unlike others on this thread, I assume that $5MM is not your only money, so I will make the assumption that you are already diversified with other investments like Real Estate and Private Equity placements... if not, I suggest you look at those as well.. you can buy residential and commercial RE in depressed areas that are likely to bounce within the next 3-5 years with a C-O-C return of 10% at the very least..
stay away from tax liens, unless you have a staff to work for you and have more than $5MM .. those return quite a lot of $$$ @ 18% or more, but the issue is finding quality product that will be paid off and not foreclose... you dont want to have to take things to foreclosure, not worth the hassle on this market..
above all things... have a plan... having all the money in the world means little if you have no idea what you are doing... a clear plan with what you want to achieve with that money will dictate not only the goal and objectives, but the exit strategy when those goals/objectives are reached...
otherwise, I agree with @Lornz and @Private Banker ... just be warned about CTA's... there are lots of them out there, and many are a scam or wanna be's... best to work with a Private Bank or Wealth Management Firm that is reputable ... just keep in mind that if $5M is all you have, that might not be wealth to many of the elite banks.. but given current market conditions, I am sure they would take your business either way.
then again, you might already know all this things, might have multigenerational trusts setup, more money than you can spend for the remainder of your lifetime and $5MM is your play money... in that case.. some of the above still applies.. just talk to your banker.
PS... btw.. with $5MM your daily target would be $50K+ and your daily loss as well should be $50K... BTW... so that is really depending on your risk management..
Last edited by sysot1t; September 14th, 2011 at 02:08 PM.
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hmmm... curious.. are you referring to retail traders or all traders in general? because there is a huge difference on impact to what you are stating...
first, all positions are hedge on the institutional side... so while market did open lower after 9/11... you have no idea how much money was made that day by baskets of stocks from perceived impacted industries were short before the markets were halted.. similar to the brief tremors we had a few weeks back that trigger a sell off... baskets were shorted within seconds on impacted sectors, and you would have also seen the increase on both options and underlyings...
so yes, more than likely a retail trader was wiped... but let's not say "traders" so broadly since there are different tiers.. I consider myself retail, but I still hedge my risk as I do not carry stop losses when I trade equities..
but back to the original OP's discussion... no sense on hijacking a thread...
1. I would not trade futures if your goal is a relatively low-risk, consistent daily return. There are other instruments that give you a better chance of controlling your risk, like options spreads. You could structure a spread trade that will net you a $5K return while establishing your downside risk from the beginning, and the more capital you have to throw at it the better equipped you'll be to find high-probability opportunities. Of course you will still lose some percentage of the time, so you would need to structure the approach intelligently to make sure you're risking an appropriate amount in light of the upside and the probability of failure.
2. With any instrument or trading approach, the returns might average out to $3K-5K per day but the sequence of returns will most likely vary wildly. +15K, -12K, +3K, etc. This needs to be understood up front, that the goal is a sequence of returns that tends to give you a certain profit on average, as a steady, reliable return is really hard to come by.
3. You can't go into it thinking that you'll just trade until you hit your $5K daily goal and then stop, since once you account for losing days this means that your average daily return will be signifantly lower than your goal. The average return on your winning days needs to be substantially higher than your profit goal in order to average out to meet your profit goal. How much higher depends on how frequently you'll encounter losing days and how large the average loss will be on those days.
4. Personally I think that .1% per day should be attainable but very few traders would actually attain it. Traders tend to sabotage themselves by letting losses grow too large, failing to take valid signals, or calling it quits when experiencing a drawdown before they have the chance to work their way out of it. With the proper expectations up front it is easier to do what has to be done.
If you dumped something like 100 contracts on the table of an Emini index wouldn't this prevent you from scalping short term considering how much liquidity there is to match a few ticks/point or two? Perhaps, an automated trading bot would pick up on that block order and try to counter it as to pick up on the difference of synchronization with the ES or other related indices. I have no clue and have always wondered if its possible to do short term scalps trading 80+ contracts.
I've tried this sometimes with the sim, Seemed like there was a couple ticks of slippage but nothing serious at liquid times of day. However, I wouldn't use a Sim as any real evidence.
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I'm not sure a 100 lot would be a big target for HFT's. They're probably looking for bigger order clusters. You should have your stops placed where your trade is no longer valid relative to your method. Having said that, it is absolutely possible to do short term scalps with 100 contracts trading the ES. I guess the term "scalp" is loosely thrown and means a different amount to many people/traders. Traditionally one would be referring to a few ticks but what I'm referring to is grabbing 2 - 3 points in the ES. The type of order you are using to enter and exit your position can help with this as well but generally you can get filled on a 100 lot no problem. But this position size should be reserved for very experienced and well capitalized traders obviously but one could build their way up to this over a proven period of time.
Yeah, Sorry, I am referring to short term trades probably in the range of a 2-3 points at market. I assume someone trading with that amount of capital would look to stay in their trades a little longer than a few ticks. Would you say most well capitalized traders would look to trade the ES over other indices due to the liquidity? But then again, I'd assume someone with that much capital would rather look at futures mainly to hedge other investments. Have you ever heard of someone trading purely futures with that amount of capital from home?
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Just look at the order book to find out what size you can trade. It's far thinner now than just a couple of years ago, but you can easily trade fairly big on the ES. And yes, there are individual traders scalping that kind of size. At least there used to be, before the advent of HFT-programs...
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You may want to see this methdology for your profit targets
Arbman1 - sounds like you need to consider compounding your returns vs going all in with everything you have. Both will get you to your goal, but compunding returns lets you stay in the game much longer. A good site I came accross that shows this concept. www.provesta.co good food for thought.