Quote from Rob on Business:
Thanks Cache Landing,
How much on average does one need to start playing spreads? I've been with IB and have very much enjoyed their low commissions, although they don't have any charts or analyses to speak of. I've never been with anything else, and imagine as you and others have said, there's more comprehensive service out there. I paper traded for about 3 mos. before joining, and wasn't making money there either! I was so eager to get in the game that I paid little heed to the warnings I heard as to how fast I could lose lots of money. It's amazing how much it takes to burn the gambling instinct out of oneself. And how resilient it is! As I have said before, I know how to make money, but not how to keep it!
From someone who's never kept any money from this game...
Well, if you know how to make money then the minimum I would recommend shouldn't be a problem. Back when I first started trading, I actually started with $500. Everyone laughs when I tell them that. I turned it into $4000 within a year and used most of it to buy furniture. But then I was hooked. I scraped together about a thousand the next time. Turned it into $20,000 within a short amount of time playing earnings reports. Then I got over confident and lost pretty much all of it over the course of a year or so. What had been working before was no longer working (straddles/strangles and other delta neutral strategies).
I spent the next few years developing different strategies and teaching myself what not to do. During those years my account zero'd out twice. I learned a valuable lesson. MOST books on options are full of crap. They aren't worthless, but they teach a lot of half truths. I then settled into the methodology that I use now and it has treated me well for quite some time. Let's just say I don't have to worry about my account reaching zero any time soon.
When I was a bit younger I enjoyed playing (limit) poker because I'm not too far from Vegas. They say you should sit down at the table with at least 20X the big blind. This is because in limit poker, patience is key. Only play the high probability hands. In the mean time, you want to be able to handle getting unlucky a few times. Trading options is similar. You can't do that with a $500 account value in options. With proper money managment you can succeed starting with about $3,500 (the initial account minimum at TOS). Your chances are much better starting with $5,000. You have to be able to come back from bad luck.
Now, can I take $500 bucks from someone, lump it together with mine, and make them money? Absolutely, because I can diversify. With my methods, on $3,500 bucks, you could reasonably be in 5-7 positions at one time and still have room for misfortune. I would recommend being in around 10 at once (hence the $5000).
Anyway, not that you needed a life story, but I just got typing and hear's where I ended up.
And by the way, I never paper traded before risking real money.:eek:
