Getting Started Trading on a Shoestring
how's this for an idea:
1) work and save up a stake of say $12k.
2) hole up in your house for a couple of weeks (depending on how quick you pick things up) and study for your Series 7
3) get a part time job (out of market hours) that earns enough so that you can eat and live (albeit minimally) -- don't worry, you'll be so focused on this trading thing you won't be going anywhere or doing anything else, will you?
4) pop your 10k into a prop firm
5) trade 100 share (or less, if they'll let u do odd lots) positions.
6) don't even think about making money, just keep cutting those losses short. i'll say that again, don't even think about making any money, just keep cutting losses.
7) let's say you take 20 trades a day, cutting losses at .15 and taking winners at average of .15 (of course, you should be going for more - but don't worry about that for now). let's say you're sooo inept that only 30%, or 6/20, turn out winners. that leaves you $160 in the hole (commish included). even if you sucked this badly for 40 straight trading days -- that's about 2 months of hitting 6 of 20 every day in a row -- you'll still have half your stake left.
8) note: if you're hitting less than than 6 of 20 for 40 days straight, come and tell me what you're doing -- you're on a winner.
9) most likely, you should be able to last for three solid months and still have nearly half of your initial 12k left if you call it quits at that point.
10) after that first 3 months or so of trading in this manner, you should be very close indeed to 'getting it'. indeed, you may have even become profitable (congrats).
11) if you didn't end up getting it, but your equity sank so low your firm asked you contribute extra funds, just go find another job and save up another 10k or so. remember you should still have about 5-6k left from this time around.
12) anyone should be able to save 10k within 6-12 months. if you lack the discipline to put aside 10k in that time period, in my not-so-humble opinion, you're an idiot and may as well not trade in the first place.
13) start trading again. if you did indeed focus in on cutting loss after cutting loss after cutting loss (ad nauseam) as i advised you, you will have learnt A LOT from the initial experience. this time around, with, hopefully, a tad more equity, you should be able to turn the corner and become a bona fide profitable trader -- in any case, your chances of being one will be far, far greater than the typical idiot who starts trading.
14) all up, if this endeavour fails, it will have cost you about 10-12k. hardly a king's ransom. if it succeeds, you stand to make massive multiples on that initial stake. that's what you call 'high reward to risk'.
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