This thread is funny! 
250K enough to trade with?
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Quote from candletrader:
This thread is funny!
Actually I believe this thread to be a very good one. Hopefully this thread will be of good use to those who are starting out trading while at work full time. There has been some digression with unrelated offhanded comments from those on ET that have nothing constructive to add (what else is new), but for the most part its been an informative back and forth discussion of ideas and opinions.
Many people who start trading really don't know what they want out of it. They don't have a plan that includes so many variables that need to be shored up before they even attempt it. In this thread alone a number of those variables have been addressed and just reading this thread from beginning to end will hopefully get some of the newer traders to start doing some hard thinking about the road they are currently traveling on.
Wait you actually trade? Now thats a joke.
Look man Im gonna help you out. Bottom line, anyone with 8 years of successful trading experience fully knows about prop shops, retails shops and institutional desks. So if your friend truly existed, he would not need any advice from ET forums. If anything, ET needs advice from him.
You don't make 15k into 250k by getting advice from newbie wanna be traders on a public forum. You get the facts and make your own decisions. You make it sound like your friend is too dumb to check out a few prop and retail options to make his own decision. It really is not that hard.
This just in, Trump seeking real estate advice ....can anyone suggest a forum for help. thnx
01-21-04 axeman> Who cares if this is truth or fiction. ...If the character is real, then he will benefit. If he is not, then newbies may benefit
Good point.
01-21-04 Harry123> With an account of 500k I will not let the account drawdown worse than 10% thats 50k in absolute amounts. In order to achieve that I have probably come to an adaptation of sorts where by I do not use my total pool of buying power in order to achieve these constrained drawdowns.
01-21-04 illiquid> I've known people who "invested" on the side and turned 20k into 750k in less than a year -- these numbers are not impossible considering how insane the markets have been in the recent past. In fact, it would not surprise me to learn that the 15K went to 500K or more (esp around 2000) before ending up at 250k.
There has been passionate debate despite the incomplete performance stats of "15k into 250k in 8 years" Without knowing that account's peak equity, max drawdown of equity, and volatility of the equity curve (or Sharpe ratio), how is anyone to have a sense whether that level of performance was skill or luck? Strongly positive returns is not proof of skill. Much discussion here carried an implicit assumption that the equity curve was a smooth line between 15K & 250K.
For instance, let's suppose Anthony has a trading style which occasionally saw 20% drawdown. If he uses his full interday Reg.T margin leverage of 2:1, then such a drawdown would be amplified into 40% loss of account equity, leaving him with $150K. If he used intraday PDT buying bower leverage of 4:1, that 20% drawdown would amplify into a loss leaving him with $70K in account equity.
For someone trading on the side, such a drawdown is painful and frustrating but does not destroy your livelihood, making you unable to pay your bills. However, in this case that changes the original question into, "Is $70K($150K) enough to quit his job and start trading?"
Suppose someone says that $X is an adequate amount to trade for a living, and that they believe they can achieve Y% annual ROI, but they suffer drawdown of Z% below $X. Now they are under the gun to find a way to come up with an ROI of (Y% + Z%). However, this is after they failed the much simpler goal of Y% ROI.
Harry123's reaching 500K was probably due to his conservative money management rather than in spite of it. i.e. he minimized the depth of the Z% holes he had to dig himself out of before having any further gains representing a net addition to Y%.
Everyone knows, but it doesn't hurt to remind that margin accounts have benefits other than leverage, including short sales and instant settlement of funds for closed positions. Just because a feature (i.e. leverage) is available doesn't mean you have to use it.
If someone were willing to initially start without leverage or short-selling, they could keep their equity in a cash account. They could "daytrade" with 1/3rd of equity each day. In Anthony's case, this would be about $80,000 of trades per day. That's 2,000 shares of QQQ, or 20 round-trips of 100 share lots. If he averages 10 cents gain per share, that's maybe $200 per day, roughly $50K per year, before expenses. (an imperfect example)
Good point.
01-21-04 Harry123> With an account of 500k I will not let the account drawdown worse than 10% thats 50k in absolute amounts. In order to achieve that I have probably come to an adaptation of sorts where by I do not use my total pool of buying power in order to achieve these constrained drawdowns.
01-21-04 illiquid> I've known people who "invested" on the side and turned 20k into 750k in less than a year -- these numbers are not impossible considering how insane the markets have been in the recent past. In fact, it would not surprise me to learn that the 15K went to 500K or more (esp around 2000) before ending up at 250k.
There has been passionate debate despite the incomplete performance stats of "15k into 250k in 8 years" Without knowing that account's peak equity, max drawdown of equity, and volatility of the equity curve (or Sharpe ratio), how is anyone to have a sense whether that level of performance was skill or luck? Strongly positive returns is not proof of skill. Much discussion here carried an implicit assumption that the equity curve was a smooth line between 15K & 250K.
For instance, let's suppose Anthony has a trading style which occasionally saw 20% drawdown. If he uses his full interday Reg.T margin leverage of 2:1, then such a drawdown would be amplified into 40% loss of account equity, leaving him with $150K. If he used intraday PDT buying bower leverage of 4:1, that 20% drawdown would amplify into a loss leaving him with $70K in account equity.
For someone trading on the side, such a drawdown is painful and frustrating but does not destroy your livelihood, making you unable to pay your bills. However, in this case that changes the original question into, "Is $70K($150K) enough to quit his job and start trading?"
Suppose someone says that $X is an adequate amount to trade for a living, and that they believe they can achieve Y% annual ROI, but they suffer drawdown of Z% below $X. Now they are under the gun to find a way to come up with an ROI of (Y% + Z%). However, this is after they failed the much simpler goal of Y% ROI.
Harry123's reaching 500K was probably due to his conservative money management rather than in spite of it. i.e. he minimized the depth of the Z% holes he had to dig himself out of before having any further gains representing a net addition to Y%.
Everyone knows, but it doesn't hurt to remind that margin accounts have benefits other than leverage, including short sales and instant settlement of funds for closed positions. Just because a feature (i.e. leverage) is available doesn't mean you have to use it.
If someone were willing to initially start without leverage or short-selling, they could keep their equity in a cash account. They could "daytrade" with 1/3rd of equity each day. In Anthony's case, this would be about $80,000 of trades per day. That's 2,000 shares of QQQ, or 20 round-trips of 100 share lots. If he averages 10 cents gain per share, that's maybe $200 per day, roughly $50K per year, before expenses. (an imperfect example)
Excellent inference to my post KC11415. I do look back and think of where I might be today had I been much more aggressive. Then I think that maybe I would have had drawdowns due to that would have had me wasting time having to win back the same real estate twice so to speak and left me and left me at a lower amount then I presently have. One can never know. I wouldn't change a thing looking back, its been a long road and a hard learned one. Going forward though I do believe I have become overly conservative as I stated and up until last year I decided to challenge myself and more efficiently utilize my buying power while maintaining a level of safety at the same time. How I achieved this was by playing more shares of low beta stocks while adding a moderate to aggressive daytrading strategy on good trending stocks during any given trading day. Examples of such recently BRCM, CSCO, RIMM, TASR. So with this dual income stream of both swingtrading and daytrading I have been able to overall ramp up my production while keeping in check the drawdowns to the same degree as in the past. So far so good. I also have other safeguards such as the total amount of capital I am willing to risk per trade and certain trading scenarios that through experience I know that are high probability and I will increase size accordingly. Learning to know when to lighten up and load up as well which is only learned through experience from years of trading is another major factor in keeping drawdowns to as much of a minimum as humanly possibly.
Speakingout:
> ... I am posting for my friend ...
The mystery is why "Anthony" cannot type but needs
Speakingout to interact with the forum.
> ... I am posting for my friend ...
The mystery is why "Anthony" cannot type but needs
Speakingout to interact with the forum.
Speakingout already said so like 5 times in this thread why can't you accept it and stop focusing on it. What he said is legit. He didnt want the guy's first post to be starting a thread like this in order to keep the focus on the subject not that he was a newbie to ET. Instead what you get now is the other side of the coin where people say how come he didn't open up an ET account. Geez man you can't please eveybody on this site so let it be and accept it. There are gems in this thread so why focus on nonsense. I just don't get it sometimes.
Harry123:
> There are gems in this thread ...
Can you list them concisely? Then we can throw away all
else and focus on them.
> There are gems in this thread ...
Can you list them concisely? Then we can throw away all
else and focus on them.
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