2% rule on small accounts?

Quote from melee:

right now im am solely focused on gold futures and that represents only 20 ticks of price movement. i dont know how $200 is in other futures, stocks, or options.
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With a $10,000 account, I would suggest that you forget about gold futures - even the mini contract - for now. Instead, if you really must give it a go with gold, consider two viable alternatives:

1) gold ETFs - GLD, IAU, etc. You get all the familiar characteristics of listed stocks... mostly pros, a few cons. Among the cons... low 2:1 - 4:1 leverage (retail, as opposed to prop); limited trading hours; can't daytrade with $10K. However, low leverage might not be such a bad idea unless you already know exactly what you're doing.

2) Oanda's spot gold, XAU/USD. Yes, Oanda... people always seem to forget that it offers metals as well as currencies. You can pick any trade size, from 1 oz. to 5,000 oz., in 1 oz. increments. Which means you can design and implement just about any any conceivable MM method. Open 24/7, with tight spreads 24/5. 50:1 initial and 100:1 maintenance leverage is constant (none of that day / overnight monkey business) and is many times more than would be enough to hang yourself with in a day. (With $10K, you could buy or sell half a million, or nearly 750 oz. at current price level.) Use sub-accounts to simultaneously explore different methods / time frames / versions of MM. Enough said... start with their demo platform, of course.
 
thank you all for your help, i appreciate it alot.

let me try a few rebuttals

gold futures-ive been criticized for choosing gold futures (or just futures), but i am set on trading it. and there is no freaking way im touching options with my money. after thinking about my devotion to one market i have decided that it is counter productive. so i'll follow related markets (silver, platinum, maybe copper) as well as some others. i think that futures' ability to buy on margin outweighs the large cost (compared to my account size) because of the style of trading i plan on doing--longer term, trend is your friend based trades.

account size- some have been saying that 10000 bucks i no enough to start trading with. i can understand where your coming from(that a beginner has to lose a little before they win), but i think it is a flawed piece of reasoning. your trading methods either work or they don't and the trading plan (money management in this case) should not be contributing to the failure; you give a plant enough water to grow, but not drown. with less water in your sprinkler(money in your account) you only need to be more careful(money management) how you water(trading method) the plant. because i understand im lacking in the capital department(ie poor) i am willing to exercise extremely tight money management.

so again,
2% or not 2%; that is the question-the proposed 2% rule would dampen the damaged done to my account, so it does have that going for it. it also offers a definite GTFO rule and psychological benefits that followed self rules give. but it does limit the window that my trades have to play out through the market noise and what-not. also talk came up about loosing 3 times and then go fix the system, thats great but if my loss is only 2% thats such a small window that my trade could have been correct in the first place!

pro que, trading gods, POR QUE!?!?!

also just to throw this out there. how about static dollar amount loss, like 500? its allows for a customizable window size on the market and loss amount. bad thing is its 500! that means i only get 10 failures if i let it hit before i get out, thats 5000 bucks-half my money! or how about technical indicator or chart biased stop-losses?

ps im sorry if this post is messed up, survivorman is on soon and i gota go watch it.
 
Quote from vectors101:

If you lose three times staight, there is something wrong with your system or something wrong with your emotion stamina
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Losing 3 times straight is actually extremely common in the markets.
 
Quote from melee:

well what do ya think?

in various books ive read about money management they usually tell ya to get out of a trade when your down, at a maximum of, 2%, so that you can take successive losses. well what about those of us who only have 10,000 bucks or less in there accounts? thats only 200 dollars! now, i look at that 200 dollar limit and say that means i can only do day trading or i have to have darn good timing on longer term trades.

right now im am solely focused on gold futures and that represents only 20 ticks of price movement. i dont know how $200 is in other futures, stocks, or options.

another way im thinking about going is just limit my loss on a trade to definite amount. lets pretend that i got 10000 dollars and a gold contract costs 2500. that leaves me with 7500 in my account. if i say 200 is my definite get out amount i can trade 37.5 time with 1 contract (not factoring in commission, profits, etc) until my account is empty. adjusting that amount effects more that how many times i can trade, it also effects the amount of market noise i can withstand on a trade.

whats a low capital speculator to do?
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Read - Darvas Book.
+ Find one Stock that has been Rocketing in past few month. Put all your money in that and watch....
 
right now im am solely focused on gold futures and that represents only 20 ticks of price movement. i dont know how $200 is in other futures, stocks, or options.


SL as example 1 point for zgq7

target 1point by R/R 1 or 3 by Risk/reward 1:3

or blend from different .

some time ,that work . Scalping ahve worst chance
-spread ,commissions


Author is contest winner with zg gold by marketzar.com
 
5% on each trade is a substantial risk (eg $500 on $10k). Most pro's would risk <1% on each position, but they have size on their size. I think the bottom line is, that with a $10k account you are not going to make huge amounts of cash unless you 1. Take big risks and 2. Are lucky. The key to trading is being in the game. If you follow steps a and b you soon will not be in the game.

If on the other hand you develop a sound strategy and a realistic approach to money management and risk and you start to make consistent returns AND stay in the game THEN you've got a good shot of making it and your $10k could start to grow.

Find a strategy/money management/risk matrix that makes you a regular monthly return on your $10,000 (lets say for argument 5%). If you compound this over a year your $10k is now nearly $18k. After another year this $10k is now $32k.

I'm not one for inspirational speaking but I recall one such story that made an impression on me. I think it may have been one of the market wizards, who was watching a bird in his garden making small and regualar trips to the bird table to get some food. The bird would dart in, take a small bit of food and dart off, then he would be back again for another small piece of food, until eventually he had stock piled quite a sizeable amount of food. This bird had never put himself in danger of other predators because he never spent too long at the table (and would therefore have been a target himself) he was nimbe, patient and methodical - just like a successful trader should be.

I guess not 100% related to this thread, but the idea of a slowly slowly approach with minimal risk is something that I think you need to considerr in order to maximise your chance of success
 
its a bad idea. very bad. especially on a 10k account. die by 100 cuts or by a few blows.. it makes no difference. its a delusion to keep the little fish feeding quarters to brokers. given the upward drift of markets over longer periods, if u get long the odds shift in your favor. Most, the vast majority would vastly, vastly increase their odds with a 10k account by getting long 1 contract es after a decline and holding through hell or high water for a few months. Does that sound too risky? ha ha. the joke is that is so much more favorable than the vast majority of all the day trading efforts. hugely better odds of success. most futures traders only shot at coming out ahead.
 
Quote from melee:



whats a low capital speculator to do?
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Try another market like forex ? marketiva is a broker I may try myself because you can choose your leverage or rather lot size: you can trade as small as ... cents.
 
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