Ahh I see. You are entering the trade with 20% of your capital, and taking out a 1% loss on the entire amount if it drops by .50 per share. My bad on misunderstanding the details.
Ideal Account Size for New / Developing Day Trader
- Thread starter _eug_
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Ahh I see. You are entering the trade with 20% of your capital, and taking out a 1% loss on the entire amount if it drops by .50 per share. My bad on misunderstanding the details.
If you don't have the discipline to stick to paper trading, you won't have the discipline that is crucial to successful trading.
50% of trading is a smart strategy, the other 50% is emotional discipline.
Go back to paper trading, and don't be weak.
I admit that I have some fear / greed and discipline issues. I am aware of it and mark it down in my journal whenever it comes up and am working through these issues. Its not something that I can fix overnight. I go through stages where I am good but then I slip up. I am a pretty disciplined person in regular life but not perfect.
I am not sure how paper trading would help with the psychological aspect of this game.
This thread was more to ask if I am really limiting my development by trading a small account. As far as I see it it is not. But I wanted to get other peoples opinions who are more experienced.
I am not sure how paper trading would help with the psychological aspect of this game.
This thread was more to ask if I am really limiting my development by trading a small account. As far as I see it it is not. But I wanted to get other peoples opinions who are more experienced.
Depending on your goal, but let's go with the idea of a basic stock portfolio:
Portfolio theory generally suggests 20 is a good diversified number of holdings to have.
You wish to trade stocks between 10$-30$, giving an average price of 20$.
For efficiency, its best to trade in lots of 100.
Therefore, you are looking at 20 companies, 100 stocks each, average price of 20$ :
20 * 100 * 20 = 40,000$
With this you are on a good ground to start doing appropriate stock investing with a long term portfolio. You can of course trim it down to 20,000$ (only 10 different holdings). But going lower than that and you start to be too highly invested in only a few companies, or end up holding less than 100/each.
Portfolio theory generally suggests 20 is a good diversified number of holdings to have.
You wish to trade stocks between 10$-30$, giving an average price of 20$.
For efficiency, its best to trade in lots of 100.
Therefore, you are looking at 20 companies, 100 stocks each, average price of 20$ :
20 * 100 * 20 = 40,000$
With this you are on a good ground to start doing appropriate stock investing with a long term portfolio. You can of course trim it down to 20,000$ (only 10 different holdings). But going lower than that and you start to be too highly invested in only a few companies, or end up holding less than 100/each.
I already have a long term buy and hold portfolio in the 6 figures range that I have been building for 7 years. I am specifically asking about Day Trading.
Account size is all relative to HOW MUCH YOU WANT TO MAKE. Larger the account, the larger positions you can take = more $$$ on profitable trades. It's all up to you depending on your risk profile. No one can answer this question except yourself.
Ideal Account Size for New / Developing Day Trader
This can Vary Greatly. It can range from anywhere...to as small as $500, to some might say $100,000.
It all depends on What you trade, and how you do it.
I wouldn't necessarily be too concerned with what's the ideal account size -- But rather your Trading Skill.
If you have no trading skill, then you are just gambling and pissing your money away eventually
Have the skill, then everything will take care of itself.
I personally think larger starting initial accounts make for more horrible traders. They tend to think and trade like investors instead of actual nitty, gritty real traders.
Trading itself, is inherently risky...so trade to make a killing -- if you will just play it safe...then just invest sleepily, safely for the long haul.
This can Vary Greatly. It can range from anywhere...to as small as $500, to some might say $100,000.
It all depends on What you trade, and how you do it.
I wouldn't necessarily be too concerned with what's the ideal account size -- But rather your Trading Skill.
If you have no trading skill, then you are just gambling and pissing your money away eventually
Have the skill, then everything will take care of itself.
I personally think larger starting initial accounts make for more horrible traders. They tend to think and trade like investors instead of actual nitty, gritty real traders.
Trading itself, is inherently risky...so trade to make a killing -- if you will just play it safe...then just invest sleepily, safely for the long haul.
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There is only one reason why a large account is necessary. Its so that you can do it wrong over and over and over again and still have money to trade.
The fact that you say you're fairly flat is actually a very good thing. You more than likely only need to make a few tweeks. Two things I would look at is, can you squeeze more profit out of your winnings trades? And second, can you cut down on your losing trades?
The size of account necessary is actually pretty easy to determine. If you have a clue, and you keep good stats, all you need to determine is what type of drawdown your trading can encounter.
Suppose you trade the ES and you risk 2 points on each trade which is $100 per contract. Next suppose you take about 5 trades a day. If you lose all 5 trades, you're gonna be down $500. Will you lose all 5 trades? Who knows.... maybe... but only you can answer that, and even then, you never know what the future will bring. But very many trades who collect long term stats will know that for every trade, they maybe average about 2 ticks profits. This means that one trade may win 4 points, next trade loses 3 points, so 2 trades in total, 1 point profit, hence 2 ticks profit per trade. Obviously long term stats are necessary here.
The point is that when you know your trading stats in all different markets, you will know how often you can lose 5 trades in a row and be down 10 points. This is only $500. If you have a 10k account, and you trade the ES with a broker that only needs like 2-3k margin, you essentially have thousands of dollars that aren't being used, and that should never be needed for margin if your stats tell you that you will be profitable after so many trades and the worst you can expect to encounter is 5 losses in a row.
Obviously you want to have more cushion so that losing 5 trades in a row doesn't affect you at all, and you don't worry about your account size at all, but this is why I preface all this by saying its easy to figure out how much money you need if you have a clue and very good stats.
Since you're learning, 10k or even 20k might not be anywhere close to being enough. But since you say you're mostly flat, I doubt your account is money limited. I've known guys who right away trade multiple contracts. There is no different between someone trading a 10k account and 1 contract, vs. a 20k account and 2 contracts. It all just comes down to math, you win rate, expected profit from a trade, expected loss, etc.
If you have taken hundreds of trades in various market conditions, and you're never scared to take the next trade, you should have enough stats to figure out exactly how much size you can put on with whatever account you have and do this for each and every trade, no matter what happens.
@_eug_ what you are doing is absolutely correct. There is no reason to scale up untill you have proven yourself that it is time to do so.
Honestly, I don't understand why anyone would recommend a bigger account "bcus u need to make da$$". This is nonsense IMO.
Keep in mind that your account will take a hit sooner or later due to circumstances you have no influence on, e.g. mid day halts because of news. If you have no edge that you can milk consistently, you'll not make that money back.
In your current situation it's better to lose 2k$ instead of 20k$
So just keep on trucking untill you have the mojo. then scale up. Always remember: defense, defense, defense, whatever you do in this business.
Honestly, I don't understand why anyone would recommend a bigger account "bcus u need to make da$$". This is nonsense IMO.
Keep in mind that your account will take a hit sooner or later due to circumstances you have no influence on, e.g. mid day halts because of news. If you have no edge that you can milk consistently, you'll not make that money back.
In your current situation it's better to lose 2k$ instead of 20k$
So just keep on trucking untill you have the mojo. then scale up. Always remember: defense, defense, defense, whatever you do in this business.