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If there is a thread on this topic, please direct me to that.
Is it considered wise, or even necessary, to keep the amount of money in your brokerage account to a minimum? In other words, let's say your "trading account" (money used strictly for trading) has grown to $50K-$100K. Do you keep that all in your brokerage account? Or, do you keep the minimum necessary to meet the margin requirements of the type and number of instruments you trade so that if you somehow blow up the account, you only have that amount to lose?
I originally traded futures before many of you were born and in those days it didn't matter because if you lost more than you had in your account they were coming after your house and everything else anyway. In those days there were only the historic commodities like orange juice, cattle, soybeans, etc. The market, especially some instruments, would occasionally get bad news and "limit down" which meant the exchange closed trading on that instrument until stability resumed so you couldn't get out of a contract until the exchange reopened trading on your contract. And when they did, you could find yourself down tens of thousands of dollars and, unless you were wealthy, you were bankrupt.
Nowadays it seems that most brokerages close your account if your margin and positions exceed the account, or if you happen to be holding on to a deliverable contract. So, if something were to happen like the internet and phone lines went down and you couldn't close a trade, it seems like that's when an account gets "blown up" and your loss is whatever you have in your account.
So, on that basis, it would seem prudent to keep the minimum amount in your brokerage account and the rest in your own savings account at home and transfer money back and forth as needed.
This is just something I've been thinking about and would appreciate the input of the more experienced traders here.
I personally keep enough to cover the size im trading and still stick to my risk,
I with draw at the end of the month. There have been months where I don't make a withdraw as I work towards adding size.
-P
"Truth is not what you want it to be; it is what it is, and you must bend to its power or live a lie"-Miyamoto Musashi
Hi
I keep the bulk with IB since they pay almost 2% for cash in account. They also give me a debt card ( can be used as CC as well), to spend as needed. The other account I had opened to try either system trading (Tradestation), or specific indicators ( which I try to avoid).
It's a fixed interest of 1.9ish% , similar to a saving account, and it goes toward any unused margin. The minimum is 10K, I believe, they better rates for 100K+. Another advantage, is low rates on margins, if needed.
You are responsible for your losses regardless of how much is in your account. Some brokers provide daily loss limits but you are correct that not all do. You can open a sub account if you want to try to use that for protection: although, you would still be responsible for any losses. Right, you should keep the minimum you need in any brokerage account to reduce the risk of the broker going under, hacking, etc. You can put the rest in t-bills(? not sure how this exactly works) or park it in a stock like MSFT (not a prediction but where I'm parking some money).
I like to keep my balances small enough to reduce some counterparty risk but large enough to have flexibility with multiple contracts, holding positions overnight etc. I dont want to be continually transferring money around.
Depending on your trading capital I also like to maintain at least 2 (ideally +3) funded accounts to disperse some counterparty risk, allow for outages, unforseen circumstances etc.
