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Trading small (sub $10,000) accounts
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Trading small (sub $10,000) accounts

  #11 (permalink)
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TheWizard View Post
I have absolutely no idea where people get off telling you you can't trade profitably unless you have $25K - $50K. HorseFeathers! What do they expect you to do - trade 100 contracts at a time? All you need to trade with Mirus / Zenfire (considering they have $500 margins) would be a minimum account - starting with 1 contract and building from there.
That means with a $25,000 account, you could (not that I would recommend it!) trade 50 contracts at a time ($25,000 / $500 = 50)

Don't let these people dissuade you from trading a small account. To margin-trade stocks? Yes - because of the SEC day-trading rule - you would need $25k to do that - but not futures! Besides, the 60/40 rule regarding the tax man and futures is much more attractive than the taxes on day trading stocks. My 2 cents? You trade a LARGE account when you are a beginner & you will SOON have a small account! Practice, practice, practice, read & absorb as much as you can, then practice, practice, practice some more. Don't jump in the deep end of the pool until you can swim in the shallow end. It's that simple. You don't need 50K to start out. In fact, I'd advise against it. I've known those who did have that much to start with & lost it all. If you're going to lose, it's much better to lose $2500 than $25,000!

a.) First of all, if you are not profitable, consistently, SIM trading, there's absolutely no reason to go live.

b.) That's a good start!

Get all your ducks in a row, SIM trade for as long as it takes to become CONSISTENTLY profitable, then CONSIDER going live. If you have a down day - go back to SIM & stay there until you've worked out the bugs. Rinse & repeat.

The other spin on having $25K before you start is to have a reserve that you don't send the broker. That way if you bust your first $2500 you have risk capital to go back to the drawing board. It's all about money management in the end.

I learned a big lesson about money management with gambling that applies to trading way before I knew anything about trading. I was going to Vegas for the first time when I was young and didn't know anything about the the rules of the games. So I bought a book. The first section of the book was money management, not gambling technique. The guy said, "Take your bankroll and divide by 10. Only take 1/10th to the table (session money) at any one time and leave the other 9/10th in the room or with the spouse. Then take session money and divide it by 10. That is your max loss per bet. If you
lose your session money you are done for 8 hours, no going back to the table." Money management was the key to his gambling techniques.

When I started reading good trading books I was not surprised about how much time they spend on money management. Is gambling like trading? In a lot of cases, yes. You have to find your edge to beat the other guy (house or big traders). You have to be around and keep the losses small until the big streak (runner) happens. Most people lose to the house and most people lose in trading.

Make certain to do the math to keep that precious risk capital as long as possible to keep you in the game.

Andrew

PS When I go to Vegas and gamble I always beat the house. Always. It's about money management and finding your edge.

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  #12 (permalink)
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AR01 View Post
PS When I go to Vegas and gamble I always beat the house. Always. It's about money management and finding your edge.

The casino has an edge on every single game. If you're an expert card counter in blackjack, you might eek out a minute edge which wouldn't mean much unless you were betting a huge amount of money at the perfect time and rarely lost. That would surely get the casino's attention and you wouldn't last long there.

If you are always beating the house, it is due to either luck or cheating. Money management will simply stall of the eventual grind of your bankroll in a casino.

Repeat: You have no edge in a casino game.

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  #13 (permalink)
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Zoethecus View Post
The casino has an edge on every single game. If you're an expert card counter in blackjack, you might eek out a minute edge which wouldn't mean much unless you were betting a huge amount of money at the perfect time and rarely lost. That would surely get the casino's attention and you wouldn't last long there.

If you are always beating the house, it is due to either luck or cheating. Money management will simply stall of the eventual grind of your bankroll in a casino.

Repeat: You have no edge in a casino game.

The right bets in craps get you true odds (pass line odds bet for example), which is the best bet for the player in a casino because it reduces the money edge to the casino for the overall bet and the individual bet is a 0% casino edge. Why does the casino give true odds on any bet? Because most rookie betters don't know how to manage their money to take advantage of it.

The "edge" I was referring to is knowing how to manage your money, increasing bets at the right times when you are on a hot roll, being around long enough to hit the streak, and then walking away. That's the edge. Walking away when you are up. I've rolled 45 minutes at a craps table and busted the table. They needed to go get more chips from the vault. In 45 minutes my money was up 10 fold. I walked away. Most at the table stayed and gave all of their money back. I just don't do it as a profession because I don't like the smoke and I was at the table 12 to 15 hours waiting for that one streak. bleh

Search here for the words "true odds" and look at the chart at the bottom where it references house edge 0% with the Pass odds and Don't pass odds bets.

Craps - Wikipedia, the free encyclopedia

I don't want to hijack this thread so this will be may last response on gambling but I needed point out that there are bets in a casino that provide zero edge to the casino.

The original point is money management applies to many things similarly.

Andrew

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  #14 (permalink)
Market Wizard
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Twiddle View Post
The issue I have at the mo is that my sim trading is consistently profitable, but I do not know if it would be technically possible live. I trade very small profit target and stop loss and sometimes make over 100 trades in a night (say 2.5 hours trading).

I don't know if the latency to the broker or real liquidity would kill my trading style, so that is why I want to go live with a small account, trading only one contract. To learn how it is like to trade for real, and from there I can evaluate whether my style is just not possible and how to adjust etc.

Initially I started out using a small time-frame chart & tried to nibble my way to the top & eventually found out that this trading style was either going to give me ulcers, deplete my account, or both. We're all different, however, and what feels like a good fit for one may be a poor fit for another. May I suggest a small SIM change - just as a test? Try a larger time-frame chart & try limiting your trades to 2 to 4 a night instead of 100. Do that for 5 days & see if there is a difference in profitability in comparison to your usual trading style. It's BORING, but seems to be paying off for me. I found myself beating my head against a wall, early on, wondering "Why isn't this working for me!!!" "I'm going to make this work!!" The trouble was "I" was the problem. Once that was recognized, then it was time to reassess and go back to the drawing board. Ego played a very large part in keeping me on the losing side. Letting go was the most difficult aspect of it all. I was sure that if I kept doing things the way that I had, that eventually it would work to my favor. Seems I was trying to bend the market to my will. Not that I'm saying you're anything like me. I know nothing about you, your personality or trading habits. Just trying to share what brought me from there/then to here/now.

I'm more peaceful now, more calm, relaxed & confident. Yes, a larger time-frame requires larger stops, but if you have a good setup & trust it & can read the signals it gives, as though you were reading a road map, then switching to a larger time-frame setup shouldn't make a difference.

Personally, I've come to recognize what Big Mike has advocated as well - trading doesn't have to be a full-time job. In other words, if you're used to working 8 - 10 hours a day, that doesn't necessarily mean you have to trade 8 - 10 hours a day. I'm coming to realize more often than not, it's to my benefit to place a few (2 - 4 trades) in the morning session & be done with it by lunch time. Once I stopped trying to trade as many hours as I work, in a week, it became more fun and ultimately more profitable. I took the pressure off of me.

Just a suggestion.

After all, it's what you learn AFTER you know it all, that counts!
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  #15 (permalink)
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I too hate comparing casinos and trading, but I do see craps as a microcosm of the trading world. While there are many strategies and approaches to craps betting - it continually amazes me how most people get sucked into the worst bets. I almost enjoy observing other gambler's behavior as much as the actual game.

Back on the topic - while it's not impossible to trade with a small account, I do believe it is much easier to be profitable with a large account vs small account. Some strategies don't lend themselves to a small account; therefore too much risk is taken. But I also believe that most people are ill prepared and as a result, they will blow out a large or small account the same.

Wizard - great advice. Imo, scalping on a sim doesn't translate to the real world very well at all. I think this is one of the reasons why many discover that live trading is less fruitful than their sim experience. Personally, I never became profitable until I learned to trade larger moves and to be more patient.

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  #16 (permalink)
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TheWizard View Post
Initially I started out using a small time-frame chart & tried to nibble my way to the top & eventually found out that this trading style was either going to give me ulcers, deplete my account, or both. We're all different, however, and what feels like a good fit for one may be a poor fit for another. May I suggest a small SIM change - just as a test? Try a larger time-frame chart & try limiting your trades to 2 to 4 a night instead of 100. Do that for 5 days & see if there is a difference in profitability in comparison to your usual trading style. It's BORING, but seems to be paying off for me. I found myself beating my head against a wall, early on, wondering "Why isn't this working for me!!!" "I'm going to make this work!!" The trouble was "I" was the problem. Once that was recognized, then it was time to reassess and go back to the drawing board. Ego played a very large part in keeping me on the losing side. Letting go was the most difficult aspect of it all. I was sure that if I kept doing things the way that I had, that eventually it would work to my favor. Seems I was trying to bend the market to my will. Not that I'm saying you're anything like me. I know nothing about you, your personality or trading habits. Just trying to share what brought me from there/then to here/now.

I'm more peaceful now, more calm, relaxed & confident. Yes, a larger time-frame requires larger stops, but if you have a good setup & trust it & can read the signals it gives, as though you were reading a road map, then switching to a larger time-frame setup shouldn't make a difference.

Personally, I've come to recognize what Big Mike has advocated as well - trading doesn't have to be a full-time job. In other words, if you're used to working 8 - 10 hours a day, that doesn't necessarily mean you have to trade 8 - 10 hours a day. I'm coming to realize more often than not, it's to my benefit to place a few (2 - 4 trades) in the morning session & be done with it by lunch time. Once I stopped trying to trade as many hours as I work, in a week, it became more fun and ultimately more profitable. I took the pressure off of me.

Just a suggestion.

Thanks The Wizard.

Sounds like a sensible suggestion. I have been suspecting all along that as I progress with my trading I will end up trading less and trying to capture larger moves.

I checked my trading stats for the month of August and I am actually trading far less than what I was a month or so ago. 33 trades per day for August, and as the month has gone on I have traded less. So the 100 I mentioned earlier may be inaccurate in hindsight, although there certainly were 100+ days earlier on. On those days I was fully aware that amount of trading is ridiculous, even though I was well in the black. It is just not sustainable, and probably would not work with live latency and fills.

33 trades a day is still probably too much... However I do feel very comfortable on 1 minute charts going for small moves. Most of my trades are capturing equalization in the noise. I think there is a lot more information displayed the smaller the timeframe. If a trader wanted to trade the underlying market moves rather than the short term noise, it seems to me smaller timeframes would still be useful for timing entries.

However, I like the idea of trading less. So I think next week I will give your suggestion a try. Try trading larger moves/timeframe for the week.

Cheers

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  #17 (permalink)
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Twiddle,
What type of orders are you using and have you traded live with them? When I first started I was using limit orders for my SIM trading and I was scalping small moves. The limit orders do not fill in real life like the do on SIM. If the market moves through your price, no problem. But if the market touches the price you are in line behind others before your order fills. My SIM trading I found out was not realistic in the real world. Something to think about.

Good luck

Andrew

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  #18 (permalink)
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TheWizard View Post
Initially I started out using a small time-frame chart & tried to nibble my way to the top & eventually found out that this trading style was either going to give me ulcers, deplete my account, or both. We're all different, however, and what feels like a good fit for one may be a poor fit for another. May I suggest a small SIM change - just as a test? Try a larger time-frame chart & try limiting your trades to 2 to 4 a night instead of 100. Do that for 5 days & see if there is a difference in profitability in comparison to your usual trading style. It's BORING, but seems to be paying off for me. I found myself beating my head against a wall, early on, wondering "Why isn't this working for me!!!" "I'm going to make this work!!" The trouble was "I" was the problem. Once that was recognized, then it was time to reassess and go back to the drawing board. Ego played a very large part in keeping me on the losing side. Letting go was the most difficult aspect of it all. I was sure that if I kept doing things the way that I had, that eventually it would work to my favor. Seems I was trying to bend the market to my will. Not that I'm saying you're anything like me. I know nothing about you, your personality or trading habits. Just trying to share what brought me from there/then to here/now.

I'm more peaceful now, more calm, relaxed & confident. Yes, a larger time-frame requires larger stops, but if you have a good setup & trust it & can read the signals it gives, as though you were reading a road map, then switching to a larger time-frame setup shouldn't make a difference.

Personally, I've come to recognize what Big Mike has advocated as well - trading doesn't have to be a full-time job. In other words, if you're used to working 8 - 10 hours a day, that doesn't necessarily mean you have to trade 8 - 10 hours a day. I'm coming to realize more often than not, it's to my benefit to place a few (2 - 4 trades) in the morning session & be done with it by lunch time. Once I stopped trying to trade as many hours as I work, in a week, it became more fun and ultimately more profitable. I took the pressure off of me.

Just a suggestion.

This is true wisdom....I suggest really taking the @Wizard's words to heart. 100 trades a night will drive you crazy AND give you an ulcer when you go live. I too started with smaller targets and have made the switch to looking for larger moves. It is boring, but we don't trade for excitement, we trade for income. If you need excitement, go out and sky dive or drive a car really fast......don't look to trading for your excitement.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #19 (permalink)
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Twiddle View Post
Thanks The Wizard.

Sounds like a sensible suggestion. I have been suspecting all along that as I progress with my trading I will end up trading less and trying to capture larger moves.

I checked my trading stats for the month of August and I am actually trading far less than what I was a month or so ago. 33 trades per day for August, and as the month has gone on I have traded less. So the 100 I mentioned earlier may be inaccurate in hindsight, although there certainly were 100+ days earlier on. On those days I was fully aware that amount of trading is ridiculous, even though I was well in the black. It is just not sustainable, and probably would not work with live latency and fills.

33 trades a day is still probably too much... However I do feel very comfortable on 1 minute charts going for small moves. Most of my trades are capturing equalization in the noise. I think there is a lot more information displayed the smaller the timeframe. If a trader wanted to trade the underlying market moves rather than the short term noise, it seems to me smaller timeframes would still be useful for timing entries.

However, I like the idea of trading less. So I think next week I will give your suggestion a try. Try trading larger moves/timeframe for the week.

Cheers

One other thing about turning a lot of round trips....commission costs will eat you up if your targets are real small. You need a high win rate just to cover your commission costs and the losses you will surely have. Looking for larger moves will reduce the commissions as a percentage of your profits and the nice thing is your stops while somewhat larger will be very small in relation to the potential rewards you will be targeting.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #20 (permalink)
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Twiddle View Post
Hi all,

I recently started reading "High probability trading" by Marcel Link. So far the book seems good.

The book places a lot of emphasis on not being under capitalized and implies trading with less than say 25k to 50k would be very difficult.

I have seen this echoed here by a lot of people, and it is clearly true.

However, having said that I wonder the following things:

a) Can it be a worthwhile exercise trading a small account when you are a beginner, just learning the ropes, using small positions sizes and managing risk fiercely.

b) Through selective trading and good risk management is it possible to be profitable with a small account with reasonable (I.E small) profit goals?

To expand on b; an example might be only trading with the trend, on a pullback when the price action has started resuming in the trend direction. Stop placed just below the lowest pullback point in order to kill the position if it turns out to be a reversal. This would allow a tight stop while giving a decent probability of a gain.

I realize this is a simplified example, but I am sure you get what I mean.

Being super selective in which trades you take may allow you to have the tight stops you require while still giving you the chance for profit.

I am very much a beginner at this, have been sim trading for about 3 months now, and plan on going live next month with a 5 - 10k account (part time after work). I expect to lose most of this, or at least be extremely happy if I can break even in a year. But I may hold off if the experienced among you truly beleive this is a bad idea.

Any thoughts appreciated.

Twiddle,

I started a thread in June that deals with this very subject. Its called https://futures.io/journals-daily-charts-chart-reading/4211-zen-art-small-account.html Its not perfect but some of the trials and tribulations of my journey are documented there. Several people have chimed in and I've found a lot of value in listening to the different perspectives there.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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