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Minimum starting funds to learn to trade

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  #1 (permalink)
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I'd like to have a discussion on what the minimum starting funds are for someone to learn to trade?

Your answer doesn't have to be in terms of dollars, it could be in terms of percentages or however you want to express it. But the question is, how much money is enough money, realistically speaking, that someone needs to start with in order to really have a shot at being successful?

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  #3 (permalink)
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Enough to execute proper risk-management, 0.5 % - 1 % per trade.

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aediaz1 View Post
Enough to execute proper risk-management, 0.5 % - 1 % per trade.

Sounds good, but I would want to add the following:
The risk $ per trade is obviously dependant on your method and with that the absolute value of the 0.5-1% risk. This basically means that the method and account size have to match, and you cannot on a proven method cut the risk in half and still expect the same (positive) results.
You should also be able to maintain that proper risk management after a serious (eg. 30-50%) drawdown.
Also very important would be the maximum anticipated drawdown of the system traded.

vvhg

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  #5 (permalink)
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Is the question "how much to learn how to trade"? Or how much to be successful"?

I think they are two different questions.

The answer to the first on is easy. $500 open a forex account and trade tiny lots and learn what it feels like to lose money and how to deal with proper position sizing, trade management and all the other things you need to learn.

Once that is done and a trader has confidence they can trade larger size, then I say at least $20,000 to make sure they are trading appropriate size for the account and proper risk management so that each trade does not exceed a realistic risk threshold.

At this point, I think the more the better.

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  #6 (permalink)
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My opinion is much more relevant to Forex than anything else. For futures, the short answer is don't touch them until you can trade profitably with micro/mini forex or CFD Indices if available. If you started with futures then I think you really a need ideally 25k to start with.

I think the key is % risk as has already been mentioned. 1-2% maximum per trade, with no more than 5% in live trades at anyone time. It is the concept of money and risk management that are important, not the actual dollar amount.

Starting with $1000 in a FX micro account is a reasonable . This means risking in a single trade a maximum of 2% which is $20, which in general (depending on pair) would represent about 200 pips of risk. With 2 micro lots this equates to roughly a maximum stop loss of 100 pips. This is a reasonable amount of room for 4 hrly / Daily trades.

If you are successful, with a single trading system for a significant period, 6 months or so, then you could look at working with $10,000. The money management and risk parameters would remain the same, just you would be risking $200 per trade etc.

Of course, before all this, one should demo trade for a long period. How long will depend on the how seriously the trader treats the demo account. If unrealistic risks are taken in demo and you are profitable, it is highly likely that you will blow up your account with real money.

Small steps....Demo....Micro.....Mini......Standard lots. All of which should be traded with the same risk management parameters as described for micro.

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  #7 (permalink)
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I think it needs to be qualified by these questions:
  • What instrument are you trading?
  • What is the tick value?
  • What is most you are going to risk on any one trade? (has to be 3% or less)
  • Do you have a strategy that fits the 3% or less rule?
  • What is your account minimum? This should be calculated on the smallest account size needed not to exceed 3% of capital on any one loss. Using 6e as an example; if your stop is set up to lose a maximum of 200 dollars then the minimum account size needs to be 7000. (7000 * 3% = 210)
  • How many consecutive losses would it take before you have a margin call or reach the account minimum? This is a important question. A trader should be able to lose >30+ trades in row before your account blows up. For example, my strategy allows me to lose 80 consecutive trades in row
.

Applying those question to 6E:
  • What instrument are you trading? 6E
  • What is the tick value? 12.50
  • What is most you are going to risk on any one trade? (has to 3% or less or account capital) $200.00
  • Do you have a strategy that fits the 3% or less rule? Yes
  • What is the required margin (for futures) 5,400 on MB trading. Used overnight margin.
  • What is your account minimum? 7000. Using the 3% rule as explained above. (7000 * 3% = 210)
  • What is the minimum consecutive losses your account can endure before hitting a margin call or account minimum is hit ?(should be >=30) 50
Formula:

Minimum account value = (maximum loss per trade * minimum consecutive losses (>=30)) + Margin or Account Minimum (whichever is larger)

(200 * 50) + 7000

Minimum account value: 17,000

edit: I did not include commission or slippage in the calculation. This should be added to your maximum loss per trade.

SD

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  #8 (permalink)
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3x the amount of overnight margin per lot

i.e. ES is at 5k with ToS, so 15k. 2 lots would be 30k. 3 lots, 45k...

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  #9 (permalink)
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My formula would be:

A = minimum account $
r = maximum risk $ + slippage + commission
R = maximum risk % of account
D = maximum anticipated drawdown as % of account

A = (1/R)*(1+D)*r


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  #10 (permalink)
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Start with the money you are ready to lose.

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  #11 (permalink)
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I would be well bank-rolled, 10k per ES contract

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  #12 (permalink)
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With my past experiences

1. Only trade what you are willing to lose
2. Only trade live once you have successfully traded a SIM account with 30 days and have not blown it
3. keep your account balance minimum to trade with (live)

so.....

1. Because you most properbaly going to blow it 1st 2nd and 3rd time unless your super special

2. Because then you have proven to yourself you can do it with a proven 30 day record (NO CHEATING)

3. If you do make a huge mistake and get sucked in to a big emotional looser you let run, instead of blowing
you account with $20,000 you will only blow you account minimum value and have money left to see another day

I think when learning to trade, there is only so much you can do on SIM until you have to bit the bullet and try play with real cash

Then you feel the real emotions and greed kick in and you see how this affect your trading

Most people donít have enough to start trading with a 1% risk

so for the people that cannot achieve this 1% risk rule

I say set a daily loss you feel acceptable in comparison to your account size

and most importantly

set a daily profit too and be disciplined enough to stick to these rules NO MATTER WHAT

if you cannot stick to a plan while learning and keep disciplined

you will never make it past the learning stage

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  #13 (permalink)
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sam028 View Post
Start with the money you are ready to lose.

Very true! But does it really have to be all of it?

vvhg

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  #14 (permalink)
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Please, continue...

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  #15 (permalink)
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If an idiot like I was when first started trading 100k. At least have a fighting chance before blow it out.

If smart and listen to veterans on this board could start with 5k or 10k and be okay.

The idiot comes in makes a few good trades and thinks he has it all mastered. Idiot also usually tries to give advice to veterans and attacks anyone on board who would dare question thier logic even though only been trading two days.

The smart guy comes in takes it slow and realizes he knows nothing and should learn from others success's and mistakes. He listens and absorbs.

Point being different rates depending on disposition of the student. Bottom line is who do you want to learn from? If learn from the market itself will find it is a brutal task master. You will learn by fire and hope at the end you still have funds and relationships. If learn from veterans may be a much slower path but much less pain.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #16 (permalink)
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Start with what you can afford to lose , of course. I would start small, maybe 3K, and just trade one car , write in your journal religiously. The emotions of trading will hit you even trading one car, and emotions are your biggest enemy learning to trade.

You cannot live from 3K, but this is the amount to learn.

Math. A gateway drug to reality.
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  #17 (permalink)
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My first broker had a $1,500 account deactivation cutoff. So I put $2,500 in, because every time you lose $1k, you've effectively gone bust.

I'm not going to lie about it - I had to go down & wire more money a couple of times.

That trip to the bank will really make you stop and think about what you are doing, and whether you want to keep on doing it in the same way or not (or even doing it at all). This approach will also keep you from taking serious financial damage, because your losses are limited by default.

Until you have at least learned to survive, and preferably can turn a steady profit, I don't see a serious need to start with much more than that during the learning process.

Should you HAVE more than $2-3k to begin trading? Absolutely. But how much money you need to be able to support yourself and manage risk-of-ruin on an ongoing basis is a question that can only be answered when you have some kind of track record. You have to have some idea of what type of drawdowns you need to plan for, and some idea of your win-rate and expectation, so you can at least rough-out your general risk-of-ruin and form some guidelines to work within. None of which is possible if you haven't been winning consistently for at least a little while. Which, IMO, is the hard part to begin with.

If you haven't acquired the experience and built these kinds of guidelines for yourself, then I don't think that having $100k or $150k in your account is much of an advantage over having $2,500 in it. In fact, it could be a disadvantage.

I had a good friend that lost $90k in 2 days. What did she learn from it? I have no idea, but she doesn't trade anymore . . .

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There will be a lot of different opinions around this topic, which is fine. But you would need to provide some convincing answers to yourself on risking more than a few thousand dollars in their early stages of your trading career.

The reason people learn a lot from losing an entire account, is the psychological frustration behind that forces them into constructive thinking. It's fueled by extremely strong motivation of never experience such an event again, ever.

To me this is like almost dying of an overdose of heroin in order to understand that heron is bad in the long run. It doesn't make sense. Sure its probably fun in the beginning, just like trading.

If anyone can provide a single, reasonable sentence on why you have a greater potential to become a profitable trader, starting of with 100k instead of 1000$ in your trading-account, I'm all ears

From my perspective, your main goal as an aspiring trader is to develop a profitable system. Too big or small account will affect your strategy, either by moving the market or being undercapitalised, but I don't think this should be any issue for new traders.

This thread remind me of of a priest who wanted to start trading 4-5 years ago. If I recall it correctly he had opened an account of no more than 150k $ of his church money and wanted to make them grow - with the help of Forex trading. His strategy was rather (un)original and simple: open an position and pray that it would go into profit, since God was his ally. I'm not going to spoil a good story by telling how it went but let me share that he looked for advice on what he did wrong.

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  #19 (permalink)
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I'd like to mention that starting will probably be on the AMEX,NYSE,NASDAQ. And possibly DAYTRADING. I think everyone should know what this means , starting out. A clarification of this is important to newbies. I would write something more but I'm not sure what the daytrading limitations are. I'm worried that a newbie would trade alot and have his account put on hold , then learn this stuff.

________________________________________________________________________

I had a FINRA link here but I don't have enough points to do it.


Does this rule apply only if I use leverage?
No, the rule applies to all day trades, whether you use leverage (margin) or not. For example, many options contacts require that you pay for the option in full. As such, there is no leverage used to purchase the options. Nonetheless, if you engage in numerous options transactions during the day you are still subject to intra-day risk. You may not be able to realize the profit on the transaction that you had hoped for and may indeed incur substantial loss due to a pattern of day-trading options. Again, the day trading margin rule is designed to require that funds be in the account where the trading and risk is occurring.


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  #20 (permalink)
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aediaz1 View Post
If anyone can provide a single, reasonable sentence on why you have a greater potential to become a profitable trader, starting of with 100k instead of 1000$ in your trading-account, I'm all ears

Here you go: Include cost of living.


aediaz1 View Post
This thread remind me of of a priest who wanted to start trading 4-5 years ago. If I recall it correctly he had opened an account of no more than 150k $ of his church money and wanted to make them grow - with the help of Forex trading. His strategy was rather (un)original and simple: open an position and pray that it would go into profit, since God was his ally. I'm not going to spoil a good story by telling how it went but let me share that he looked for advice on what he did wrong.

Everyone knows that praying needs precise profit targets, otherwise it's not going to work!

vvhg

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  #21 (permalink)
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My thought is that the optimum amount to learn is absolute zero. My reason is that if you learn in simulation only, and spend several years getting good, THEN you add money to the mix you are much, much more likely to be successful.

Trading is not something you can learn "In Game". You have to learn techniques that work (which you can do in a few months), and hone your skills over a few years or more. You simply need time to see how the system works in all the major market conditions. 6 months in ideal conditions can lead to a blow out if you put real money on just when the conditions you are used to dry up. Experience as much as possible before you do it for real.

College is a4 year endeavor....learning to trade should be at least that.

In todays world, simulated electronic trading is really close to what you would experience in real life, with live real time data feeds and all that. Of course, it cannot simulate Limit moves and such extreme conditions, of course, but they are near perfect for learning and perfecting skills the rest of the time.

The truth, is that Trading is hard. It's not easy, and it takes YEARS to get really good. A 3 month trading course just teaches you the tools of THAT system. You are a long, long way to go till you are ready to get in with real money.

My thought is that if you can develop a system that wins 70% or more of the time, and you can consistently do that for a year, you are ready to enter with real money. How much money will depend on what you want to trade, and the margins required to control contracts.

This is just my opinion of course, but it is an opinion based on a study of Commodity/Futures trading going back to the mid 90's.

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SpearPointTrader View Post
My thought is that the optimum amount to learn is absolute zero. My reason is that if you learn in simulation only, and spend several years getting good, THEN you add money to the mix you are much, much more likely to be successful.

Trading is not something you can learn "In Game". You have to learn techniques that work (which you can do in a few months), and hone your skills over a few years or more. You simply need time to see how the system works in all the major market conditions. 6 months in ideal conditions can lead to a blow out if you put real money on just when the conditions you are used to dry up. Experience as much as possible before you do it for real.

College is a4 year endeavor....learning to trade should be at least that.

In todays world, simulated electronic trading is really close to what you would experience in real life, with live real time data feeds and all that. Of course, it cannot simulate Limit moves and such extreme conditions, of course, but they are near perfect for learning and perfecting skills the rest of the time.

The truth, is that Trading is hard. It's not easy, and it takes YEARS to get really good. A 3 month trading course just teaches you the tools of THAT system. You are a long, long way to go till you are ready to get in with real money.

My thought is that if you can develop a system that wins 70% or more of the time, and you can consistently do that for a year, you are ready to enter with real money. How much money will depend on what you want to trade, and the margins required to control contracts.

This is just my opinion of course, but it is an opinion based on a study of Commodity/Futures trading going back to the mid 90's.

Trading SIM will never equal trading real cold hard cash. Also trading SIM for more than about 2-3 months will do more harm than good. Emotions drive most traders and can not be duplicated in a SIM. SIM is for you to learn your method, learn your platform, and get dressed for the game. Once that is done, you have to go to live or you have to go home...

It is better to trade real money real small for years until you can become profitable.

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  #23 (permalink)
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tturner86 View Post
Trading SIM will never equal trading real cold hard cash. Also trading SIM for more than about 2-3 months will do more harm than good. Emotions drive most traders and can not be duplicated in a SIM. SIM is for you to learn your method, learn your platform, and get dressed for the game. Once that is done, you have to go to live or you have to go home...

It is better to trade real money real small for years until you can become profitable.

I agree completely with that, but trading sim is better for your health lol.

I think the stress of being in positions either drives you forward or out the door. An experienced trader once told me that its the business of a trader to often to make decisions that are counter intuitive, I think that's true, and you can only really feel that if you trade live.

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  #24 (permalink)
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sands View Post
I agree completely with that, but trading sim is better for your health lol.

I think the stress of being in positions either drives you forward or out the door. An experienced trader once told me that its the business of a trader to often to make decisions that are counter intuitive, I think that's true, and you can only really feel that if you trade live.

I can't define the optimum amount except to say that it needs to be enough to cause you profound pain when you inevitably wipe it out. Rinse and repeat until you learn the lessons required which will include humility. There is no free lunch.
Cheers John

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  #25 (permalink)
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I started with $10k. Its scary.

For my strategy I have to risk 5-10% per trade to be successful. That means I'm 5 consecutive losers away from my ROR levels.

But with each successful trade I'm decreasing my risk per trade, due to increased capital. Eventually I'd like to see 1 contract per $25k but who knows what my research will dictate by then.

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Really depends on the product. You could start in micro forex for as little as a few hundred dollars. Get used to trading successfully with just 1 micro lot, and then learn how to get aggressive with leverage when it is called for. Try doing that with futures, and your odds of blowing out a much larger account quickly are much higher. I would definitely recommend starting trading cash stocks (no leverage) or trading micro forex at around a 5-10:1 margin level. Learn to not risk more than you can make on a trade. You will need more to trade stocks, but swing trading them without leverage will not expose you to as much risk. That could be done with a few grand. You will not get rich with it but you will learn.

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With proper risk management (my personal rule of thumb is to never expose more than 2% of
the capital on a single risk), every trade will be dictated by your capital available

If a certain instrument does not fit this plan you will be trading what is in accordance with this risk management

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  #28 (permalink)
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Hi,
this may be a controversial subject, but let;s assume a few facts, and then ask the same question, how much capital do you need?

a. If you lost MOST of your capital through trading something and it didn't work?
For instance, I lost about 3 K trading OIL not long ago ( never traded it before).....my account was down to about $400.
b. Then, let's say that ( due to necessity), you decided you were absolutely going to WIN back that stake no matter what !!! What if you made that statement and meant it.
c. Then you traded something you were more familiar with, and you were using a very rational, common sense approach - which the HUGE loss helped you STICK TO, and you followed rules because you HAD TO.

d. The CHALLENGE then is - could you do it in 1 month???

I did it......and now I'm happy to really GO FOR IT because I realised something in this Big loss, BIG win scenario....
you'll never get rich trading 2% of your account size. And why should you trade 2 % anyway? What beginner trader has 50 K? It's an oxymoron to assume that, because lots of traders are hugely under-capitalised in relation to their trading vision ( I will make a living from trading etc). If you have 5 K, my challenge shows you don't need 50 K to get win enough to start trading.....

e. If you lost $400 trying to make $3000 in a month, how may times could you do that, month after month before you threw the towel in? ( If you lose the $400, you can't trade until the next month)......
My answer is .....I would never give in....it's such a small amount compared to my day job income, it's totally worth the small risk, and the challenge.....why ? because
1) I'm not risking 50 K to start and pretending I'm not scared, and thus trading only 2 % and pretending that if I lose 2 % It wouldn't hurt me psychologically. Why? because, who makes $1000 per day? Not many, that's why.
It wouldn't matter how long it took to make 50 K. It hurts to lose it for most mortal beings here ( be real please).
2) If I lose $400, that's my average daily takings from my day job, not bad you say? Well I think it sucks. That's why I would part with such a small morsel of funds and barely blink ( god knows the tax man takes more than that per week in Australia !)......If it meant gaining financial freedom through trading for a living.....If you can make 3 K from $400.....in 1 month, I'm sure you could make 40 K in a year. I don't care what anybody says on this site....

Just take the challenge yourself.........I've already proven to myself I can do, and I did it with the worst kind of stress, trying to get your losses back.....but that's my point in the thread.......ANYBODY can win their stake back IF THEY ABSOLUTELY MUST DO IT......well, if you have even some small ability trading......If you don't, you can't hide behind 2 % money management risk saving rules........why not prove to yourself you even have what it takes to be a successful trader and stop pussy footing around for years and years procrastinating.....

Sorry, I just say what I think........scold me? I don't care.....just take my challenge...prove it to yourself.

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  #29 (permalink)
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if I'm asked I would suggest starting with 100k and using just half of it with no leveraged instruments.
Give yourself 2/3 years and once you have made a 20/30% over your initial account try more leveraged instruments risking half of your profits.
But this is not the way I started.

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  #30 (permalink)
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montanajtt View Post
if I'm asked I would suggest starting with 100k and using just half of it with no leveraged instruments.
Give yourself 2/3 years and once you have made a 20/30% over your initial account try more leveraged instruments risking half of your profits.
But this is not the way I started.

How did you start?

-Jimmy
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  #31 (permalink)
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FABRICATORX View Post
How did you start?

it's a long story, anyway to make long story short, when I sold my internet based company that I co founded with an initial capital of just 5k, I founded a prop trading company. I worked with some top level traders that taught their way of working. When that kind of working was starting not to work anymore, one of them asked me to run on a company account some automated strategies he had developed on futures, just to try something new.
Those strategies worked very well for two years so I started developing some myself. When I closed the company I continued working in that direction and I still do.

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  #32 (permalink)
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Hi,
this may be a controversial subject, but let;s assume a few facts, and then ask the same question, how much capital do you need?

a. If you lost MOST of your capital through trading something and it didn't work?
For instance, I lost about 3 K trading OIL not long ago ( never traded it before).....my account was down to about $400.
b. Then, let's say that ( due to necessity), you decided you were absolutely going to WIN back that stake no matter what !!! What if you made that statement and meant it.
c. Then you traded something you were more familiar with, and you were using a very rational, common sense approach - which the HUGE loss helped you STICK TO, and you followed rules because you HAD TO.

d. The CHALLENGE then is - could you do it in 1 month???

I did it......and now I'm happy to really GO FOR IT because I realised something in this Big loss, BIG win scenario....
you'll never get rich trading 2% of your account size. And why should you trade 2 % anyway? What beginner trader has 50 K? It's an oxymoron to assume that, because lots of traders are hugely under-capitalised in relation to their trading vision ( I will make a living from trading etc). If you have 5 K, my challenge shows you don't need 50 K to get win enough to start trading.....

e. If you lost $400 trying to make $3000 in a month, how may times could you do that, month after month before you threw the towel in? ( If you lose the $400, you can't trade until the next month)......
My answer is .....I would never give in....it's such a small amount compared to my day job income, it's totally worth the small risk, and the challenge.....why ? because
1) I'm not risking 50 K to start and pretending I'm not scared, and thus trading only 2 % and pretending that if I lose 2 % It wouldn't hurt me psychologically. Why? because, who makes $1000 per day? Not many, that's why.
It wouldn't matter how long it took to make 50 K. It hurts to lose it for most mortal beings here ( be real please).
2) If I lose $400, that's my average daily takings from my day job, not bad you say? Well I think it sucks. That's why I would part with such a small morsel of funds and barely blink ( god knows the tax man takes more than that per week in Australia !)......If it meant gaining financial freedom through trading for a living.....If you can make 3 K from $400.....in 1 month, I'm sure you could make 40 K in a year. I don't care what anybody says on this site....

Just take the challenge yourself.........I've already proven to myself I can do, and I did it with the worst kind of stress, trying to get your losses back.....but that's my point in the thread.......ANYBODY can win their stake back IF THEY ABSOLUTELY MUST DO IT......well, if you have even some small ability trading......If you don't, you can't hide behind 2 % money management risk saving rules........why not prove to yourself you even have what it takes to be a successful trader and stop pussy footing around for years and years procrastinating.....

Sorry, I just say what I think........scold me? I don't care.....just take my challenge...prove it to yourself.

To answer your original question, yes I can recover blown accounts, I have done so several times in the past. But, it is always smarter to not get into that position in the first place, generally it occured because I was simply pushing too hard/ overtrading.
Cheers John

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  #33 (permalink)
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Refreshing this thread with a new poll:

How much money do you need to trade futures successfully?

Total votes: 1110
 


Please vote and discuss.

Mike

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  #34 (permalink)
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I voted $10-$50k for 2 reasons:
  1. This is where I fit
  2. But most importantly, it's sufficient enough to trade the market and see if you have an edge or not.

Adding money to an account is easy (2nd job, sell assets, TST, etc.), but what good is a big account if you don't have an edge?

edit- I should add that with an account that small, you should not expect to take money home until you grow your account. It's just useful for determining whether or not you have an edge.

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  #35 (permalink)
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I feel the higher end of the 10k-50k range is ideal to begin. Any more than that and I feel you'd be setting yourself up for a big loss if you don't know what you're doing. Any less and it's difficult to have a position with a proper stop or to be able to add effectively to it. Just my thoughts.

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  #36 (permalink)
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The new poll is quite a different issue than the original poll and title of the thread. I think first one has to define what "trade successfully" means. To me it means trading as my sole or primary source of income, providing for my family, and building wealth for retirement (something I'm a long ways away from now). That's going to take at least 750,000 in trading funds. Preferably a lot more.

If you're skilled and can realize, say, a 20% annual return after taxes, that's 150,000 salary. Pretty good, but still basically working for a living. Keep in mind that your standard of living is going to keep rising, especially if you have children. Buying a home, health care, school tuition--it's all going to keep going up. Skyrocketing in some cases.

For all the people that voted such low amounts (10k, really?) I'd like to know what their definition of successful trading is. Making beer money? Being consistently profitable? I'm consistently profitable now, but nowhere near calling myself a full-time trader.

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  #37 (permalink)
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It depends if you have an edge and dicipline. Give @Rory or @Inletcap who have both five grand and I would bet they could quadruple it in a short amount of time. Give a inexperienced or average trader with no edge/dicipline 250 grand and they would blow it up in a month or two.

In this case, size does not matter.

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  #38 (permalink)
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Pariah Carey View Post
The new poll is quite a different issue than the original poll and title of the thread. I think first one has to define what "trade successfully" means. To me it means trading as my sole or primary source of income, providing for my family, and building wealth for retirement (something I'm a long ways away from now). That's going to take at least 750,000 in trading funds. Preferably a lot more.

If you're skilled and can realize, say, a 20% annual return after taxes, that's 150,000 salary. Pretty good, but still basically working for a living. Keep in mind that your standard of living is going to keep rising, especially if you have children. Buying a home, health care, school tuition--it's all going to keep going up. Skyrocketing in some cases.

For all the people that voted such low amounts (10k, really?) I'd like to know what their definition of successful trading is. Making beer money? Being consistently profitable? I'm consistently profitable now, but nowhere near calling myself a full-time trader.

Glad you brought up this.

For me, I find that 'trading successfully' means I can trade just as I want to, in order to prove my edge. Meaning I'm not passing up on setups that look good simply because the risk would be too high for my account.

Will I make enough $ to sustain my lifestyle? Absolutely not! But as someone who is in the early stages of their trading career and has potentially 30+ years left in their trading career, I don't need to be making 'take home' money right now.

As you prove your edge, you can find ways to add $ to your trading account. Get a second job, beat the TST, sell assets, etc. As time goes by, and if you have an edge, you will eventually have enough $ in your account to be able to live off of it.

Additionally, if you can prove you have an edge of let's say 40-60% annual ROI consistently, and a methodology that is scalable. You shouldn't have a problem finding investors who are willing to place some bets on you to beat the S&P and the bigger hedge funds, assuming you have a decent amount of business understanding of course.

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  #39 (permalink)
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Trade futures successfully?

Does that mean for a living without another job? If so, it requires taking into consideration your living expenses.

Either way, no amount of money is enough if you're not a consistent trader.

If you are a consistent trader you could probably stay profitable with the amount of money 10-20 trades worth of losses would cost before hitting margin. Even then you might have to refund or have money to live off of while waiting through uncertain times.

Trading without a second source of income isn't the smartest idea be it 10,000 or 10,000,000 unless you really know what you're doing.

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  #40 (permalink)
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Big Mike View Post
Refreshing this thread with a new poll:

How much money do you need to trade futures successfully?

Total votes: 1110
 


Please vote and discuss.

Mike

I just voted, and I found myself voting 'something else'.

The reason is, I think asking the question "how much do you think is needed to trade x successfully" can be misleading.


As someone else pointed out, if you know what you're doing (which needs to be broken down into experience, discipline, execution, etc.), then the amount it takes may be relative.

The other component can be your trading strategy. If you have a strategy that is successful but is subject to significant drawdowns, then the capital at play needs to take that into account.



So, to me, it's more of a question of approach than of capital.



Hope makes sense.


BTW @Itchymoku love ur Outrun avatar

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  #41 (permalink)
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I voted for 250k+. This is because for me to trade my specific strategies, methods, and portfolios to get the type of returns I am looking for. Maybe you can make money with less, but it would not be viable to do it the way I trade. Honestly I probably could not do it for anything less than 1M. Sounds arrogant but its true. I would have severe position limitations that would destabilize my portfolio and have adverse results on my returns due to lack of risk capital.

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  #42 (permalink)
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I would stick to the rules of 1% max and if possible to risk even lower do it if you can.
Why because you want to be able to trade as much as you can to sample your results as much as you can.
Also what product are your trading?
What time frame?
What are your fees per trades?
For example (in my case):
Trading time frame : 1 min
Average stop size: 4-5 ticks
Product (for example):M6E
Average loss:5 ticks x 1.25 = 6.25 + 2.5 commission = 9
9 dollar x 100=900 dollars
So you can trade the M6E with 1000 dollar

I would also add that I would highly recommend that in this case you don't have more than 2000 dollar as safe guard to not blow more than needed
Revenge trade etc..
can harm you more than you expected.
The goal is to protect your capital first .



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  #43 (permalink)
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Setting a risk limit of 1% is only one aspect of money management. What percent of your trades get stopped out at 4 to 5 ticks? Your expectancy is what will determine if you have a profitable strategy. If you don't win more than you lose, in the long run, you will wipe out your account. You can have more losers than winners and still make money as long as the amount you win per trade, on average, times the percent winners exceeds the amount you lose per trade times the percent losers.


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  #44 (permalink)
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bradhouser View Post
Setting a risk limit of 1% is only one aspect of money management. What percent of your trades get stopped out at 4 to 5 ticks? Your expectancy is what will determine if you have a profitable strategy. If you don't win more than you lose, in the long run, you will wipe out your account. You can have more losers than winners and still make money as long as the amount you win per trade, on average, times the percent winners exceeds the amount you lose per trade times the percent losers.


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100% of my trade get stopped out with 4-5 ticks max.
The question was the amount to start trading.
The expectancy is to be determined after a series of trades live.
The expectancy on sim and live are two different thing,emotions are different.
I gave a example of my situation,
If your trading time frame is higher of course your stop will tend to be wider.


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  #45 (permalink)
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I'm not sure where being under capitalized ranks on the reason traders fail but I'll bet it is in the top 3.

I agree that the poll is confusing. What is trading successfully? If it means having a profitable system then a trader with an edge doesn't need a lot of capital. If it means being able to live off your trading gains then I think the more capital the better.

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  #46 (permalink)
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Maybe someone with a lot of experience can answer this situation. What would be the differences with starting with a 6,000 account as opposed to a 12,000 account? This would be for someone just trading the ES for the purpose of preserving and increasing capital. It seems to me the advantage with the 12,000 is that I can trade more contracts and be just a little less worried about drawdowns to margin call. But, when starting out, is trading more than one contract a good idea?

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  #47 (permalink)
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johny1971 View Post
Maybe someone with a lot of experience can answer this situation. What would be the differences with starting with a 6,000 account as opposed to a 12,000 account? This would be for someone just trading the ES for the purpose of preserving and increasing capital. It seems to me the advantage with the 12,000 is that I can trade more contracts and be just a little less worried about drawdowns to margin call. But, when starting out, is trading more than one contract a good idea?

I don't have much experience but I don't see why anyone would want to trade more than 1 contract while starting out, no matter how big their account is.

The beginning stages of a trader's career are going to involve heavy losses and the priority should be on capital preservation. Trading more than 1 contract does nothing good for you in regards to capital preservation.

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  #48 (permalink)
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SoftSoap View Post
I don't have much experience but I don't see why anyone would want to trade more than 1 contract while starting out, no matter how big their account is.



The beginning stages of a trader's career are going to involve heavy losses and the priority should be on capital preservation. Trading more than 1 contract does nothing good for you in regards to capital preservation.


I actually disagree. Size management is a very key lesson for new traders and it can only be done by practicing trading with more than 1 lot.
While it is possible one find an edge by trading one lot and successfully scale up with all in all out style, the restriction on potentials and possibilities is not worth the capital saved.

There is many other ways to achieve the purpose of capital preservation in the early stage: trade TST combines or trade smaller tick size contract like YM.



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  #49 (permalink)
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I think most people underestimate the amount of capital needed that it takes to trade successfully if trading is your only source of income.

I have attached a spreadsheet of a trader making 100% per annum on a $100k account who wishes to withdraw $5k a month to live off. First example uses linear returns, i.e. compound interest at 6% per month which adds up to just over 100% per annum.

The second example uses more random returns, I assumed losing months of -1% and just increased winning months by 1% per month. Final month returns were obtained using a goal seek so that annual returns would be 100%. In the second example the account will have less capital in at than it had at the start of the year. The trader returned 100%, but is still down for the year! Remember that in real life monthly returns can be subject to big swings. It would be unwise to assume no one will ever have big losing months.

So, for each individual to determine whether they are sufficiently capitalised to trade full-time, anyone can just take their trading statements for the last 2 / 3 years and populate the spreadsheet I have provided with their monthly returns for that period, their current starting capital and their desired monthly withdrawals. Once that is done, they still need to have an extra withdrawal for taxes which may happen once or twice a year and perhaps consider reducing the monthly returns to add a level of robustness.

Once that is done, anyone can see how much capital is needed to trade full time. In my own case, I would not consider trading full-time with less than $500k, even if I average 100% p.a. for 2 or 3 years. Even if I could survive off my capital, I want the account to grow and $500k would be the minimum for me to entertain going full-time.

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  #50 (permalink)
 
 
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johny1971 View Post
Maybe someone with a lot of experience can answer this situation. What would be the differences with starting with a 6,000 account as opposed to a 12,000 account? This would be for someone just trading the ES for the purpose of preserving and increasing capital. It seems to me the advantage with the 12,000 is that I can trade more contracts and be just a little less worried about drawdowns to margin call. But, when starting out, is trading more than one contract a good idea?

Your risk of ruin goes down a lot when you start with $12K vs $6K. Even if you have an edge, you still need a big enough cushion to stay in the game during inevitable drawdowns.

Here is a simple example... Say you start with $6K or $12K. Your system trades once per day, wins $500 fifty percent (50%) of the time, and loses $400 the other fifty percent of the time. Over the course of a year, on average you'd more than triple your money ($12,500 profit per year) - in other words, you have a solid edge. Let's say your quit (ruin) point is $4K ($2K loss from the $6K start).

If you start with $6K, you have a 32% chance of falling below $4K during your first year of trading. In other words, 32% chance of being ruined.

If you start with $12K though, you chance of ruin drops to 2%.

(my example is always just trading one contract)


That is why large enough starting capital is so important... if you are lucky enough to have an edge, you need to make sure you stay in the game!

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grausch View Post
I think most people underestimate the amount of capital needed that it takes to trade successfully if trading is your only source of income.

I have attached a spreadsheet of a trader making 100% per annum on a $100k account who wishes to withdraw $5k a month to live off. First example uses linear returns, i.e. compound interest at 6% per month which adds up to just over 100% per annum.

The second example uses more random returns, I assumed losing months of -1% and just increased winning months by 1% per month. Final month returns were obtained using a goal seek so that annual returns would be 100%. In the second example the account will have less capital in at than it had at the start of the year. The trader returned 100%, but is still down for the year! Remember that in real life monthly returns can be subject to big swings. It would be unwise to assume no one will ever have big losing months.

So, for each individual to determine whether they are sufficiently capitalised to trade full-time, anyone can just take their trading statements for the last 2 / 3 years and populate the spreadsheet I have provided with their monthly returns for that period, their current starting capital and their desired monthly withdrawals. Once that is done, they still need to have an extra withdrawal for taxes which may happen once or twice a year and perhaps consider reducing the monthly returns to add a level of robustness.

Once that is done, anyone can see how much capital is needed to trade full time. In my own case, I would not consider trading full-time with less than $500k, even if I average 100% p.a. for 2 or 3 years. Even if I could survive off my capital, I want the account to grow and $500k would be the minimum for me to entertain going full-time.

Excellent post! Everyone contemplating full time trading should read your post.

My personal experience (and observations from watching others): determine how much you think you need, then multiply it by 2 or 3x. You'll always need more than you think.

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I actually disagree. Size management is a very key lesson for new traders and it can only be done by practicing trading with more than 1 lot.
While it is possible one find an edge by trading one lot and successfully scale up with all in all out style, the restriction on potentials and possibilities is not worth the capital saved.

There is many other ways to achieve the purpose of capital preservation in the early stage: trade TST combines or trade smaller tick size contract like YM.



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There's no right or wrong answer, but here's my rebuttal.

Is it actually important for new traders to learn about size management? They'll be dealing with so many psychological issues that come with trading their capital at first. So why make things more complicated by adding size management into the mix.

In my opinion, you need to lay out the problems and prioritize. Psychological issues at the beginning of a trader's journey are far more important to learn and correct than size management.

In essence, having the best size management in the world means absolutely nothing if a trader can't follow his/her trading plan.

If you can't follow your trading plan, trading more than 1 contract won't fix that problem, it'll just cause you to lose more money faster.

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  #53 (permalink)
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There's no right or wrong answer, but here's my rebuttal.

Is it actually important for new traders to learn about size management? They'll be dealing with so many psychological issues that come with trading their capital at first. So why make things more complicated by adding size management into the mix.

In my opinion, you need to lay out the problems and prioritize. Psychological issues at the beginning of a trader's journey are far more important to learn and correct than size management.

In essence, having the best size management in the world means absolutely nothing if a trader can't follow his/her trading plan.

If you can't follow your trading plan, trading more than 1 contract won't fix that problem, it'll just cause you to lose more money faster.

I think we are going off topic a bit here, but I do want to quickly respond to your arguments because I personally believe coaching/training a new trader with one lot is very irresponsible.

Is it actually important for new traders to learn about size management? 100% it is important.

I don't know about you, but all my prop trader mates and myself found the day we got our second lot an eye opening day. We all found most of the 1 lot trading methodology /psychology became rather irrelevant and we all agreed on if we had the choice, starting off with even just two lots will significantly helped in speeding up our learning process.

Yes psychology, methodology and etc are important, but is the right psychology and methodology with one lot important to master? I argue not unless you are very certain you will become an all in all out trader.

Sure, size management means nothing if a trader canít stick to his/her plan. But instead of practicing for stick to his/her one lot trading plan, why not practice to come up with a multi-lots plan and stick to it? I believe size management and discipline are overlapping topics/lessons and separating the two is rather contradicting.

The downfall in starting with more than one lot is only $$, and it can be easily solved: trade smaller value contract, join TST, or even join a prop firm.

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SoftSoap View Post
There's no right or wrong answer, but here's my rebuttal.

Is it actually important for new traders to learn about size management? They'll be dealing with so many psychological issues that come with trading their capital at first. So why make things more complicated by adding size management into the mix.

In my opinion, you need to lay out the problems and prioritize. Psychological issues at the beginning of a trader's journey are far more important to learn and correct than size management.

In essence, having the best size management in the world means absolutely nothing if a trader can't follow his/her trading plan.

If you can't follow your trading plan, trading more than 1 contract won't fix that problem, it'll just cause you to lose more money faster.

I think teee is right. You are correct in saying that at the beginning there's so many hurdles that chucking in also size will make things even harder, especially for those, like me, that heeded the advice of star traders such as Linda Raschke saying "you must start with 1 lot".

Trouble is, when I read back FT71's comment somewhere on here that 'trading with 1 lot' is actually one of the hardest things to do, it all start making more sense.

So my point is, it's worth, even for beginners, to try (maybe on SIM) to play with 2-3 lots to see if that makes things easier or not.

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I think teee is right. You are correct in saying that at the beginning there's so many hurdles that chucking in also size will make things even harder, especially for those, like me, that heeded the advice of star traders such as Linda Raschke saying "you must start with 1 lot".

Trouble is, when I read back FT71's comment somewhere on here that 'trading with 1 lot' is actually one of the hardest things to do, it all start making more sense.

So my point is, it's worth, even for beginners, to try (maybe on SIM) to play with 2-3 lots to see if that makes things easier or not.

Where can I find the discussions you cite? They seem interesting. I am asking about the Linda Raschke and FT71 comments. I did find a cool post with charts about all in/all out versus all in/scale out more when searching thru FT71 posts - page 9 on Webinar: FuturesTrader71 (FT71) Trade Management Techniques.

I am glad we are discussing this as the amount to have can depend on how many contracts one trades.

It seems sim one, then sim scaling is the way to start since scaling can be in the back of one's mind when sim one. Then maybe start live with scaling. It can seem complicated but learning scaling would be like having another arrow, but one does have to use it effectively.

The YM seems the medium between the anxiety of the ES and the dull grind of the M6E, granted they all have their merits, but the YM seems to be the solution in terms of possible psychological comfort when starting out. Plus, starting the trading day at 2am seems a little too hardcore for me.

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Where can I find the discussions you cite? They seem interesting. I am asking about the Linda Raschke and FT71 comments. I did find a cool post with charts about all in/all out versus all in/scale out more when searching thru FT71 posts - page 9 on Webinar: FuturesTrader71 (FT71) Trade Management Techniques.

Linda Raschke - from book Street Smarts. High Probability Short Term Trading Strategies:

Quoting 
Immediately look to scale out of your trade as the market moves in your direction. By taking
some of the trade off, you are decreasing your risk and locking in profits. If you are trading
on a one-contract basis, as you should if you are a beginner
, move your resting stop to
protect any gains.


and


FuturesTrader71 View Post
[...]
In my opinion, trading a 1-lot is much tougher than trading multiple contracts. Through Stage 5 Trading and by watching traders trade, I noticed that traders do one of the following when their account is not big enough to manage multiple contracts:
  1. There is a tremendous amount of fear and over-thinking while the market is moving
  2. Trade a 1-lot with a very tight stop while using too much leverage for their account size
  3. Trade without a risk limit for the day or defining risk per trade (after all...it is a do-or-die situation)
  4. Overtrade and do so randomly

[...]

From this post

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I see where you guys are coming from, and I don't want to add a rebuttal because you guys are clearly more experienced and know more than me lol.

Just thinking about it from a logical standpoint, if someone has a $6,000 account, or even $12,000, I don't see how it's advisable to risk more than 1 contract, it just seems like you'd be taking way too much risk per trade.

Although if you are scalping I guess it could work, I don't know the parameters to be a successful scalper though.

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I see where you guys are coming from, and I don't want to add a rebuttal because you guys are clearly more experienced and know more than me lol.

Just thinking about it from a logical standpoint, if someone has a $6,000 account, or even $12,000, I don't see how it's advisable to risk more than 1 contract, it just seems like you'd be taking way too much risk per trade.

Although if you are scalping I guess it could work, I don't know the parameters to be a successful scalper though.

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@teee @xplorer

Don't get me wrong, SoftSoap, I did not intend with my posts to infer that one should try to trade more than 1 lot at the beginning. Linda Raschke's advice still stands IMO.

My point is that one should be aware of the fact that trading 1 lot as a longer term proposition can be tough because once you close it you're out of the trade, whereas being aware - even at the beginning - of the benefits of trading multiple lots can be helpful from a preparation point of view.

Hope this clarifies it.

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It's not hard to trade multiple lots/contracts in a small acct when you're trading intraday margin.

Trading 1 contract is infinitely difficult, and super super tough to stay profitable.

We trade at minimum 3 ct, using a method that initially started with the Joe Ross Hook.

Jimmy

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SoftSoap View Post
I see where you guys are coming from, and I don't want to add a rebuttal because you guys are clearly more experienced and know more than me lol.



Just thinking about it from a logical standpoint, if someone has a $6,000 account, or even $12,000, I don't see how it's advisable to risk more than 1 contract, it just seems like you'd be taking way too much risk per trade.



Although if you are scalping I guess it could work, I don't know the parameters to be a successful scalper though.



Cheers.

@teee @xplorer


though I stand my stance that new traders should start with more than one lot, this is coming from me, a prop trader's perspective. My strong belief of this being right doesn't make it right. I mean this is what the forum is for right? We bump our thoughts and grow as a whole =]

You are absolute right if someone has $6000, tight risk from trading more than one lot might cause psychological burden given the risk of ruin. This brings back to our topic, how much do we need? It's already well covered by most people here, more the better. And 6000~12000? One better trade that account being well awared it will be blown at one point... Trading small acounts are trading lessons and these lessons should definitely cover size management. If one cant tolerate the financial costs, there are alternatives as I suggested.

I think to be successful in trading, base capital of 250,000+ with investment of 20,000~ 100,000 as tuition fee is about right, in my opinion.





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teee View Post
though I stand my stance that new traders should start with more than one lot, this is coming from me, a prop trader's perspective. My strong belief of this being right doesn't make it right. I mean this is what the forum is for right? We bump our thoughts and grow as a whole =]

You are absolute right if someone has $6000, tight risk from trading more than one lot might cause psychological burden given the risk of ruin. This brings back to our topic, how much do we need? It's already well covered by most people here, more the better. And 6000~12000? One better trade that account being well awared it will be blown at one point... Trading small acounts are trading lessons and these lessons should definitely cover size management. If one cant tolerate the financial costs, there are alternatives as I suggested.

I think to be successful in trading, base capital of 250,000+ with investment of 20,000~ 100,000 as tuition fee is about right, in my opinion.





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Can you elaborate as to what you mean by 'tuition fee'? Are you referring to money that should be spend on learning resources?

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Can you elaborate as to what you mean by 'tuition fee'? Are you referring to money that should be spend on learning resources?


I mean money u blow or given to the market before you start being consistent. In another word, the tuition fee you pay to the market to learn your mistakes. Obviously this differs between individuals but at least be mentally and financially prepared to pay up during the process of learning.




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I mean money u blow or given to the market before you start being consistent. In another word, the tuition fee you pay to the market to learn your mistakes. Obviously this differs between individuals but at least be mentally and financially prepared to pay up during the process of learning.




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Makes perfect sense, thx!

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It's just my personal opinion but your trading account need to be proportional to the time frame and product your trade risk management is the key.
If you want to trade and make an income out of it sure you need some capital but if you want to learn start small less than 1% of your capital so the psychological damage is lower because the psychological damage is what damage and influence you not the financial damage.
Ask your self this question if I lose this next trade would it bother me?
If yes reduce your risk,period.
About 2 contract and scaling out.
It depend on your strategy.
If your target happens to be more than often the point we're the market turn and you are right then actually scaling out is going to make your risk reward lower.
If you tend to get out too early and the market still go in your favor most of the time then yes scaling out might be the best solution.
I like ft71 way of thinking but he said it himself do not trust anything of what I say you need to try and do your homework on your self.
Stop thinking about making 500 a day or anything like that,
The goal at the beginning is do I follow my rule,do I have an edge and then when you can prove that you can then increase size accordingly.
If it took you 5 years of saving to build you account how would you feel about loosing 1% of it?
Let's say you have 100 000.
1 year saving is 20000.
1 month is 1666.
If you trade 1% per trade and you loose and you will at time loose 3 time in a row you loose 3000 in one day.
Which corresponds to 2 months of savings,would you feel comfortable with that?
That's the question I think really matter.
Trading is already hard enough so let's not make it harder
That's just my opinion.


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moriarty View Post

Stop thinking about making 500 a day or anything like that,
The goal at the beginning is do I follow my rule,do I have an edge and then when you can prove that you can then increase size accordingly.
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It comes back to how you measure success. If you measure success by whether you follow your trading plan and if you have an exploitable edge then the amount of capital is irrelevant.

I don't have a problem with risking 1% of your trading capital on any single trade as long as you have the discipline to follow your plan and your edge has a positive expectancy.

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If you are fine risking 1% than by all means go for it.
I'm just saying if you can't be profitable with a small account on the micro product with a small account the likelihood of you being profitable is really low even with a big account if you start trading.
Money is a result of you being good at trading.
My goal is to buy were I think other traders are going to buy after me or sell if I believe other trader will sell after me period that is my work/goal.
If you can do that constantly then money you will receive.
When a Mike Tyson or McGregor go into the ring they focus on winning the match not on money they are going to make.
Like a surgeon if operate and do is work well will receive a good salary.
For a starting trader focusing on ticks made over lost is what leads to improvement.
If you think about money most of people and myself include tend to have less clear judgement and start to dream if I make this a day then In one year I'm a millionaire.
Forget the money,I've been there it's not helping.


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I think the amount of money you need to be successful with depends entirely on your trading plan. The money follows the plan and definitely not the other way around.

So, in regards to number of contracts traded, it depends on your plan. If your plan is one contract then that's that. If your plan is to trade multiple contracts, then that may work for you as well. Overall, decide on what trades (and components like instrument choice, hours to trade, edge and the testing of it, education, etc) will work best for you and then start plugging in the dollars into the equation. Otherwise, a scarcity mindset my hold you back.

My first question ever to the people who educate was will 6k be enough to start with. The answer did not make a bit of difference. Except when the question was out of the way I was able to focus more on learning the action of trade execution.

Regardless, the survey and ensuing discussion has been good.

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moriarty View Post
If you are fine risking 1% than by all means go for it.
I'm just saying if you can't be profitable with a small account on the micro product with a small account the likelihood of you being profitable is really low even with a big account if you start trading.

I agree. If you don't have an edge it doesn't matter what you account size is you will more than likely lose money.


Quoting 
Money is a result of you being good at trading.

That may or may not be an accurate statement. If you trade small enough and often enough, trading expenses can eat up your profits even if you have a winning strategy. Being under capitalized can make a difference.




Quoting 
When a Mike Tyson or McGregor go into the ring they focus on winning the match not on money they are going to make.

Granted but they get paid whether they win or lose and they know and accept the risk that they might lose. Unlike a trader they can't control their risk.

Quoting 
For a starting trader focusing on ticks made over lost is what leads to improvement.

Ticks = money. Focus on the process. What to trade, when to trade, how much to trade and when to exit your position.


Quoting 
If you think about money most of people and myself include tend to have less clear judgement and start to dream if I make this a day then In one year I'm a millionaire.

It is much easier to trade if you start with a million. The amount of capital does matter.

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  #69 (permalink)
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Subjective question. The answer differs depending on experience and circumstances. Generally I'd say the more capital you can invest the better, this also has implications for the amount of per trade risk you take on. Which for a new trader is a helpful control mechanism.

Whatever the amount capital preservation is prime.

But as someone has said earlier, if you're a pro you can in most cases trade with any account size and be incrementally successful in your work. I saw a website recently where a chap in the UK was trying to trade 10k to 100k over 24months, he was a pro trader and I believe he was successful. Illustrates that point aptly.

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All you need to learn to trade is $1. Open an account with OANDA, fund it with $1 and with their flexible position sizing, you even have the ability to average down, pyramid up and scale out. Except for spreads around news events, I never had any issues with them and I did check their prices to Bloomberg if I felt my stop was hunted. Here is even a link to a trader's blog who turned $500 into $20,000 - Infiniteyield Forex. He was providing signals for his fx trades and not for his silver trades, but I recall him being bullish silver well before it started moving. So the results are most likely legit.

If you wish to trade futures and you need to ask the question, then you probably should not be trading futures. Generally before you start trading, you need to have a good idea of the margin required, the size of your expected losses, a sufficient buffer to cover a string of losses and a bit more in reserve in case you underestimated your capability to lose. So as you can see these numbers vary from trader to trader, and even then there is no guarantee of success.

During 2008 I saw several star hedge funds close down due to higher than expected losses. These guys were experts at buying the dips, but could not handle the 2008 crash. Then to add insult to injury, a lot of these funds closed their old funds, and tried to persuade their clients to join their newly created funds. Reason for this was quite simply that it would take too long for them to recover their High-Water Mark and earn performance fees. Just goes to show that even "pros" can also blow up.

What does this have to do with trading size account? Ed Seykota calls it "start-date dependency". Certain styles of trading suit certain markets and if you have the right style and the right market, you will need much less capital to succeed than when those two ingredients are not aligned.

If you haven't guessed it yet, if all things fall into place a small account can succeed at trading, but in reality larger accounts have much more leeway when things don't work. Up to each individual trader to decide how much he is willing to lose and then work within those parameters to make it work (or not).

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successfully to me means full-time and full-time trading takes 100k+

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successfully to me means full-time and full-time trading takes 100k+

You are implicitly stating that you cannot be successful with < 100k......

And you are categorically wrong.



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DaxyMcDaxFace View Post
You are implicitly stating that you cannot be successful with < 100k......

And you are categorically wrong.



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@DaxyMcDaxFace,

Please keep in mind the spirit of this forum is to be helpful and polite to others. Making a statement like "And you are categorically wrong" without further details comes off in a hostile or confrontational tone and is not welcome here.

Lively debate is encouraged, but be polite.

Mike

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  #75 (permalink)
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@DaxyMcDaxFace,

Please keep in mind the spirit of this forum is to be helpful and polite to others. Making a statement like "And you are categorically wrong" without further details comes off in a hostile or confrontational tone and is not welcome here.

Lively debate is encouraged, but be polite.

Mike

Apologies.

I will delete.



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  #76 (permalink)
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DaxyMcDaxFace View Post
You are implicitly stating that you cannot be successful with < 100k......

And you are categorically wrong.



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I didn't do that at all. First I stated my definition of success. Then I stated what it takes to be successful.
This is true for the majority of people. There are outliers of course. But even with those outliers, an extremely small % of those guys will not be full-time. Luck plays a much larger role in small accounts because you need those string of winners right off the bat. You may have a great strategy and market psyche but once you roll the dice you don't know where they will land on your strategy. Could be a string of losers with few winners for a bit for you go on a nice run. Will you still have enough money left to trade that strategy through fruition while maintaining a strong market psyche just as if it were your very first trade? No bobbles or mistakes? You better be extremely freaking sharp in every area.

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  #77 (permalink)
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DaxyMcDaxFace View Post
You are implicitly stating that you cannot be successful with < 100k......

And you are categorically wrong.



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The way I see it, he was explicitly stating and he was categorically correct.

I know some people have a view that your psychology plays out very differently when your account equity is small. Now, I don't think that's a very important factor.

The way I look at it, from an opportunity cost perspective, a small account is doomed because an entry job as an analyst that doesn't even get directly involved in trading already pays about $100k, so surely a full-time job in market timing should pay a comparable amount over a comparable amount of time, and it takes a herculean effort to double $100k in a year.

Trading capital is no different from lemons. You could probably open a lemonade stand quite affordably with 1 lemon, but why would you?

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interesting opinions in this thread. I'm not sure there is really an answer because of the subjectivity and the number of variables. Most guys whose deposit details I know/knew only drew money out of their account when the balance was bigger than what was required for about two times the std dev. of their typical trading requirements. Usually there are two reasons to do that. First you can get a better return elsewhere because excess deposit was usually in treasury bonds. Second, most guys that are/were professionally trading their own money feel that there is too much risk in most firm/joint back office agreements to their capital if someone else blows out their account.

I'd be more interested in a discussion of "edge". What do people believe to be their edge in trading? If a guy can describe his edge with confidence and certain terms that are easy to understand, he is probably making money.

Here is the thing...in my experience guys that are making money never talk in dollar terms...per trade, per day, per year, because they feel it limits them. If you have a deposit and an empirical edge, that is, one that is demonstrable you don't even take the time to talk about money...you just make money. They can get sucked into it as a pissing contest or for vanity, but it is passe.

When you are not making money you are looking for edge, buying real estate, or investing in stocks.

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artemiso View Post
Trading capital is no different from lemons. You could probably open a lemonade stand quite affordably with 1 lemon, but why would you?

Or any other business.

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wldman View Post
interesting opinions in this thread.

When you are not making money you are looking for edge, buying real estate, or investing in stocks.

What's wrong with stocks? LOL

I went back to stocks because I found I could make just as much money with a lot less stress and spending a lot less time in front of a keyboard.

I'm well capitalized and manage to fund my lifestyle and increase my net worth with a return of 20% per year. I certainly couldn't do that with a 100K account.

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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DaxyMcDaxFace View Post
You are implicitly stating that you cannot be successful with < 100k......

And you are categorically wrong.



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I'd hazard a guess that you won't make a consistent living with a 100K account.

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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because you have single lemon expectations. Many people never even consider capitalization.

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in some years if I did not own stocks or real estate I'd have made no money at all.

Though at least two thirds of the stocks, well maybe half, of my stocks will be inherited by my kids.

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Massive l View Post
First I stated my definition of success. Then I stated what it takes to be successful.

Hi Massive

Apologies, but combining both statements (which you did), you are suggesting exactly what i said.


Massive l View Post
This is true for the majority of people.

Ok, i have tried to qualify my response below.

Lets agree to disagree.
-----------------------
hi @artemiso

explicit: statement of fact.

implicit: 'suggesting'....is an opinion, which i am trying to say as polite as possible, is incorrect, as is yours, sorry. At best you are making a sweeping statement - provide me the research you have done then that will add value. To counter, theres thousands who have and are doing well starting from small accounts.....albeit poss blown a few times. What follows hopefully explains more....

@deaddog

This is your opinion. Prop traders start off with an account balance of 0. So we may be talking semantics, but noone has mentioned it so far.

To add: prop firms i have worked in, your account is built from your pnl, from day 1, ie its 0. I know plenty who have made millions starting from 0. And they only ever keep in trading account 100k max to qualify for better profit share deal, their limits are based on prev performance, and day targets are 5-20k - which makes the % return per day discussion moot as there is a whole load of other stuff to account for....eg the prop firm are putting up 1/2 mill perhaps to facilitate the trader. Leverage etc.


Happy to discuss further.

Rgds.

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  #85 (permalink)
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Big Mike View Post
@DaxyMcDaxFace,

Please keep in mind the spirit of this forum is to be helpful and polite to others. Making a statement like "And you are categorically wrong" without further details comes off in a hostile or confrontational tone and is not welcome here.

Lively debate is encouraged, but be polite.

Mike

As mentioned, i am happy to delete my posts, though as i have added to the discussion (& am open for more discussion), am hoping i dont have to.

rgds.

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  #86 (permalink)
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DaxyMcDaxFace View Post
This is your opinion. Prop traders start off with an account balance of 0. So we may be talking semantics, but noone has mentioned it so far.

To add: prop firms i have worked in, your account is built from your pnl, from day 1, ie its 0. I know plenty who have made millions starting from 0. And they only ever keep in trading account 100k max to qualify for better profit share deal, their limits are based on prev performance, and day targets are 5-20k - which makes the % return per day discussion moot as there is a whole load of other stuff to account for....eg the prop firm are putting up 1/2 mill perhaps to facilitate the trader. Leverage etc.

Rgds.

If you are trading with a Prop firm, your account starts from zero FOR YOU. But realistically the fund required/invested is not obviously not zero, the fact that Prop firm taking the risk of funding your account doesnt make the the money required to trade zero juz because it's not your money. If your parent funded your trading account of however much money, would you say your account starts from zero because you are not trading with your own money?

Even if you see it purely from your own perspective, working at a Prop firm usually does not get you paid with fixed salary, hence the opportunity cost will always be there as @artemiso mentioned. Unless you are the 0.01% that becomes consistently profitable straight away, the opportunitity costs of salary adds up. From what I know, on average Prop traders will not be profitable 1~2 years and they will start covering up the hole they dug for the next 1~2 year before start making some good money. It takes a great trader in average of 3~6 years to reach the state of consistent profitability. The opportunity costs incurred plus the split after you trading profitably would easily adds up to >200k.


Btw I'm extremely familiar with your tone...ego is something that is not lacking in the Prop world...(myself inclusive...) I know you meant no disrespect to anyone here including BM but it did came off that way to the others.


--from a Prop trader

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  #87 (permalink)
 
 
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(and avoid gringo areas).

I funded two 10k Futures accounts, one with NT (scalping focused) and another with a different broker (swing).

You can imagine which was more successful, in the first month of going live, neither however the swing account got lucky on a couple of 20-30 ES point intraday runs and pulled ahead. Since I have found that both styles in parallel works well for me.

Ok so part of my plan when I started in 2014 was to move to Colombia as here if I made $50 a day I was more than covering my expenses, all the psych pressure came off when I moved here with my capital burn rate way down.

Also no SAD from UK winters, consistent warm weather for my speedboat injured back etc. melted the stresses away.

There are so man combinations and permutations to success but assuming possible, reducing your costs (feeling wealthier with less) and increasing your happiness are important factors.

Just to add, I planned for two years of full time study as if I was going back to college, it so happens I did well before that but I was realistic.

Also as @teee said, I was a top IT consultant, a profession known for some necessary "professional arrogance", though it was mostly about never showing panic on your face (what the hell just happened!!) in front of the client. It melts away in retail though wealth brings it's own learning curve on humility. Again, Colombians give me a sense of proportion and I do the charity work here of course.

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  #88 (permalink)
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teee View Post
If you are trading with a Prop firm, your account starts from zero FOR YOU. But realistically the fund required/invested is not obviously not zero, the fact that Prop firm taking the risk of funding your account doesnt make the the money required to trade zero juz because it's not your money. If your parent funded your trading account of however much money, would you say your account starts from zero because you are not trading with your own money?

Even if you see it purely from your own perspective, working at a Prop firm usually does not get you paid with fixed salary, hence the opportunity cost will always be there as @artemiso mentioned. Unless you are the 0.01% that becomes consistently profitable straight away, the opportunitity costs of salary adds up. From what I know, on average Prop traders will not be profitable 1~2 years and they will start covering up the hole they dug for the next 1~2 year before start making some good money. It takes a great trader in average of 3~6 years to reach the state of consistent profitability. The opportunity costs incurred plus the split after you trading profitably would easily adds up to >200k.


Btw I'm extremely familiar with your tone...ego is something that is not lacking in the Prop world...(myself inclusive...) I know you meant no disrespect to anyone here including BM but it did came off that way to the others.


--from a Prop trader

Thanks @teee for empathy.....fyi I am not worthy of an ego btw, so i will be mindful i dont portray one going fwd. In fact i have just banned myself from all threads bar mine - i can only annoy myself there. In my defence i do have some knowledge from numerous experiences (3 UK prop firms etc) which i was trying to impart, and provide some balance.

Apologies to anyone who misconstrued my tone, i try to keep comments short and that often involves blunt prose....but obv no malice intended. I have one bug bear - generalisations with little evidence (Actually i prob have millions).

In addition @teee, I concur with everything you said. The prop firms i know all ditched ppl within 6 mths if not making money.... one guy stuck about cos he cld afford to and was low risk taker and after 2 years it clicked and he made it big. Wonder how many of those out there who fall off the conveyor belt.

Your post, btw, reaffirms my point: its not as simple as defining success just by account size....time/backing/low expenses/a lovely mum.... etc etc all come into it. Like most things, its not binary.

Rgds.


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  #89 (permalink)
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Professional arrogance is never a bad thing as it keeps one focused and motivated, as long as you are mindful of it.
@Rory, Im not sure about reducing costs but inceasing happiness is definitely the end goal of all we ever try to do. Should always do a top-down analysis from 'happiness' when we try to define any of our goals/plans =]


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teee View Post
Professional arrogance is never a bad thing as it keeps one focused and motivated, as long as you are mindful of it.
@Rory, Im not sure about reducing costs but inceasing happiness is definitely the end goal of all we ever try to do. Should always do a top-down analysis from 'happiness' when we try to define any of our goals/plans =]


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Professional arrogance....i will show you my pnl statement to disprove this assertion. I will call this a reverse al brooks (nothing against the guy, no idea who he is, just referring to the thread).


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this has turned into a pissing contest without any benefit other than someone being "right". Nobody wants to talk about edge?

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wldman View Post
this has turned into a pissing contest without any benefit other than someone being "right". Nobody wants to talk about edge?

Sorry dan.....

...last few posts have all been agreeing with each other?

My pnl comment was a joke. Its negative ie L....and will happily post to quash any 'pro' rumours.

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wldman View Post
this has turned into a pissing contest without any benefit other than someone being "right". Nobody wants to talk about edge?

I hope it doesn't turn into another Al Brooks thread situation!

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Just tracked back on who wldman is to get a sense of personality I started posting last Jan seems you were quiet and came back strong last month.


wldman View Post
in some years if I did not own stocks or real estate I'd have made no money at all.

Though at least two thirds of the stocks, well maybe half, of my stocks will be inherited by my kids.

So diversification as edge is what your saying? Sure. I bought a second home here, renovations are adding huge value to it. Also a medical device research company which is a money pit now but we have great hopes.

Love diversification, running mental marathons as a normal day is a huge edge in anything.

@xplorer nah, the Brooks thing was being poisoned from the TS site, the injection point needed to be cauterised. All friends here.

BTW if a snowflake lands on that Brooks thread it might start again, I'd strongly advise no posting.

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know what that comment means.

But it does read like an attack on me. Is that what you intended?

Dan


Rory View Post
Just tracked back on who wldman is to get a sense of personality I started posting last Jan seems you were quiet and came back strong last month.



So diversification as edge is what your saying? Sure. I bought a second home here, renovations are adding huge value to it. Also a medical device research company which is a money pit now but we have great hopes.

Love diversification, running mental marathons as a normal day is a huge edge in anything.

@xplorer nah, the Brooks thing was being poisoned from the TS site, the injection point needed to be cauterised. All friends here.

BTW if a snowflake lands on that Brooks thread it might start again, I'd strongly advise no posting.


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diversification is a false narrative, especially in what the forum calls trading. Edge is something you can identify or create through some unique situation, ability or application that few others can recognize right away or utilize as well or as easy as you can.

What I meant was that if I have no real edge...and that happens as the markets change, I rely on investment in equities or in real estate to carry the weight until I can figure out what is next. I don't do private equity or invest in private businesses over which I have limited control.

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to single you out Daxy as I think I have a handle on where you are coming from and tend to agree. I am not astonished at how the threads seem to degenerate immediately into a useless string of disagreement.

I just wanted to point that out. The nature of the initial question reveals something about the poster. Then the thing digresses into useless right away.

$0 balance and net liq, you have to have a certain background to know the difference and understand structure and how that works. Retail will not understand...just like asking how much you need reveals a certain but different understanding.

A tremendously subjective question should give thoughtful guys from both backgrounds, and people who trade or just play a simulation the chance to GAIN.

I was lamenting that those days seem over as evidenced how everyone jumps everyone for everything...to no beneficial outcome. I did not see you specifically do that, but we all get sucked in.

Dan



DaxyMcDaxFace View Post
Sorry dan.....

...last few posts have all been agreeing with each other?

My pnl comment was a joke. Its negative ie L....and will happily post to quash any 'pro' rumours.

Rgds.


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wldman View Post
know what that comment means.

But it does read like an attack on me. Is that what you intended?

Dan

It was not intended as an attack on you Dan. I know you were very involved before but it is hard to read personality without context.

I've been difficult a couple of times recently on threads but 1. was the Brooks thread and for a very good specific reason but not public. 2. Someone lumped me into a "you guys are" comment.

Edge has no definition on the site, it clearly means wildly different things like scalp. Edit: to clairfy, is understood as different things anyway, scalp finally got defined after it turned into a too-long debate.


wldman View Post
What I meant was that if I have no real edge...and that happens as the markets change, I rely on investment in equities or in real estate to carry the weight until I can figure out what is next. I don't do private equity or invest in private businesses over which I have limited control.

Ok, fine. I understood that but gathered you were extending the realm of edge to that which keeps you alive in relatively leaner times so you can come back strong. All clear.


Rory

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  #99 (permalink)
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These types of threads always tend to go that way. No one wants to hear that they have insufficient capital and most people believe themselves to be more lucky or good than others - @Rory mentioned the specific name for this recently, but since there were no pics, I can't recall what it's called. Think it was something like the Kruger-Dunning effect, but my ability to use Google also seems quite bad right now...

If someone is undercapitalised, it generally stems from having too little access to money and trading is seen as a way to increase their money. I mean Richard Dennis turned $400 into $100 million, Ed Seykota $5k into $15 million and Michael Marcus $30k into $80 million. However it does not mean that I or any other trader can accomplish that same feat. Accepting that a dream is unrealistic is difficult for most - it was for me! It touches on emotions we quite often don't want to face.

Saving up to be properly capitalised was probably one of the best moves I did, but still does not guarantee success at trading. It merely means I can survive longer.

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wldman View Post

I was lamenting that those days seem over as evidenced how everyone jumps everyone for everything...to no beneficial outcome. I did not see you specifically do that, but we all get sucked in.

Dan

Those days are not over just the election result caused friction mostly. Its across the planet, not just FIO. It will settle.
@grausch indeed the Dunning-Kruger effect. It is a difficult thing to explain to someone bristling with self-confidence that they might not want to try Futures. It is considered being a Grinch, often one makes a subtle point to be kind/adult however it is wasted breath.

Intellectual/experience "capital" is as important and needs to be built up also as part of personal development. But we know 1/20 (ish) make it, usually the people who were successful anyway? the 10% or 5% rise to the top thing is similar in most industries, not just trading.

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