Full time traders split of total between separate accounts

[Jakobsberg]

I am interested to know how full time traders split their total wealth between various accounts. There was some discussion in another thread but I think it deserves its own.

For example do you keep it in all in the trading account or have separate accounts for long term investments and/or cash if it all goes wrong in the trading account. To try and protect you from yourself rather than having everything in one account. The suggestion was to have only a small portion in the most active account and force yourself to have a major reappraisal if you ever need to transfer more money into it.

For me, I currently have a full time job and so trying to grow the total as quickly as possible. The bulk is in a trading account. However, if and when I switch from growing quickly to decreasing risk, maintaining wealth and withdrawing from the account a different setup is probably needed.

With say 1,000,000 splitting it up as:

200,000 in trading account. Several trades per week. Normally swing/ position trades. Variable leverage but can be high via options.

400,000 in longer term investments ETFs etc. A few trades per year. Limited leverage.

400,000 in buy and hold investments with income. No leverage.

With these accounts conservative annual targets would be 20%, 10% and 5% respectively so they produce 40,000 + 40,000 +20,000 = 100,000 per year or 10% of total. Any better ideas?

 

[rmorse]

Why do you feel the need to separate them into different accounts? Are you concerned about SIPC not covering the account total?

 

[Jakobsberg]

Why do you feel the need to separate them into different accounts? Are you concerned about SIPC not covering the account total?

Since I am not in the US SIPC doesnt apply to me. Its not so much about deposit insurance but rather having different levels of risk in separate accounts. Ensuring that if the trading account does actually blow up one day for whatever reason you have enough funds in other accounts to start again or go and do something else.

 

[DHOHHI]

I split mine into 3 basic accounts (1) trading $150K so I have plenty of BP intra-day (2) account at another broker for longer term trades/investments (3) IRA $$$ in yet 2 more accounts (Traditional & Roth). And as you alluded to regarding risk ... I am more tolerant of drawdowns in the longer term account than I would be of hits to the trading account. And I like having the money separate since I know when I jump into any of the non-trading accounts that I'm thinking longer term than minutes or hours so my mindset is different.

 

[Scaleout.Scalper]

I distribute between bank accounts (all FDIC insured) and one broker, I use extreme leverage on the broker, if a bad streak should occur, I refund the trading account from the banks.

 

[Turveyd]

I distribute between bank accounts (all FDIC insured) and one broker, I use extreme leverage on the broker, if a bad streak should occur, I refund the trading account from the banks.

I worry about 5K, never plan to keep more than 20K ( 30K high before I reduce to 20K ).

Even if your account is insured, they could still go bang and have your income freezed for 3-6months and if it's your ownly source of income = starving!

 

[Scaleout.Scalper]

I worry about 5K, never plan to keep more than 20K ( 30K high before I reduce to 20K ).

Even if your account is insured, they could still go bang and have your income freezed for 3-6months and if it's your ownly source of income = starving!

Make sure its a public company.

That way you can regularly follow price and read earnings report.

I suggest IBKR.

 

[garachen]

Segregating assets into different accounts doesn't really protect you in the case of something like the CHF move. The best protection you are going to get there is to trade in some entity, not sign any personal guarantees and get loans against whatever assets you are forced to own (seats, shares, etc).

Barring that, usually the FCMs will have minimums you need to keep with them in order to accommodate your style of trading and if they are willing to work with you on things like margin financing or be very flexible with intraday risk limits. After the recent CHF move the risk departments have grown more cautious.

As long as you are over the minimum requirement I would keep about 2-3x my overnight margin requirement in the trading account. Long term buy and hold stocks should be segregated (and not within the trading entity). Should follow "the little book that beats the market" at least for its tax advice. Then use the rest to opportunistically buy commercial real estate.

 

[globalarbtrader]

It's not clear what the goal is here. Are we protecting ourselves from our own bad luck or incompetence (I can't lose more than what's in this no matter what happens), is it a jedi mind game to mentally limit our risk, or are we trying to save ourselves from broker meltdown? There may also be practical reasons - let me explain.

I have two IB accounts, which account for about half our household liquid net worth

One trades futures, fully automated. It needs to be separate because the code that picks up account value and calculates optimal risk would have to be very complicated if it had to separate out the futures p&l from other effects. The only complication is I withdraw money then I have to manually account for that in the account valuation.

The other is long only, diversified ETF's. It probably should be with another broker for safety's sake but I like the flexibility of being able to draw down cash against it, so I need a portfolio margin facility.

I also have accounts with other brokers for ISA's (UK tax free saving account), SIPP's (like 401K I guess) and a non tax free account in my wife's name. All of these are boring, buy and hold stocks.

Even if you aren't automated it is nice to be able to cleanly see the returns from different strategies. I might in the future open another account for discretionary futures and options trading, when I get time to think about this.

 

[d08]

Since I am not in the US SIPC doesnt apply to me. Its not so much about deposit insurance but rather having different levels of risk in separate accounts. Ensuring that if the trading account does actually blow up one day for whatever reason you have enough funds in other accounts to start again or go and do something else.

SIPC applies to non-US people, you don't need to be a resident nor have citizenship there.

SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. Most customers of failed brokerage firms when assets are missing from customer accounts are protected. There is no requirement that a customer reside in or be a citizen of the United States. A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a brokerage firm that is a member of SIPC.