Min Acct. Rule- The other BIG concern!

[tradeRX]

What you forget is that people who draw down there small accounts can replenish them from earned income. How do you think they funded their accounts to begin with? You speak as though these accounts are originated and that's it... if you lose it you're finished. POPPYCOCK!

You start with a 15K account derived from your earned income, draw it down to 5K spending 10K on your "education", then DEPOSIT MORE MONEY from your earnings. There is no difference starting with 25K, or starting with 15K and adding 10K later as needed.

You guys speak as if these accounts are fixed and can never be re-funded, therefore you got one shot at it. If you have earnings from other sources, and who doesn't, then you have a source of financing the account.

Samall accounts...or large accounts, it doesn't matter as long as you have enuf money to make the purchase. I can buy 100 shares of NVDA for $7000.00. If I lose some of this purchasing power, then I'll add more from the same source that might have funded the larger 25K account.

And as def aptly pointed out, you can get into more trouble trading 25K with 4:1 margin, 15K with 2:1. So let's get off this "small accounts will never recover" bit.

tradeRX

 

[jmcgraw]

Originally posted by Wet
2. A new trader that suffers a 80 or 90% drawdown -- as in your example, is a moron that either (a) has not studied trading in the attempt to find a positive expectancy system or (b) uses no risk management. I suspect that such a fool opens his/her account and THEN begins to learn about charting/positive expectancy systems WHILE they are trading. LOL! A fool and his money are easily parted. Sure, there are things you can only learn "real time" like slippage, emotions, etc. But to learn the basics of technical analysis WHILE trading your money is just plain STUPID.

Emotions are EVERYTHING! You can study TA, calculate expectancy, etc, etc, all you want... But it doesnt go to say that just because you do, you are safe. Most new traders need to touch the stove to see that it is hot.

The chances of a new trader ALWAYS using strict risk management from the beginning are very low. They will almost always find themselves in a situation where they are breaking their own rules. Its only untill they have been punished a few times that they learn their lesson.

Most new traders also have the illusion that trading is easier than it really is. How do they realize beyond a shadow of a doubt that the illusion is false? They lose their money.

Also let me add, that most traders do start off with poor money management because very few books cover the subject. Especially position sizing.

 

[Magna]

tradeRX,

You guys speak as if these accounts are fixed and can never be re-funded

Please re-read the comments on this thread, as most of the people here (myself included) aren't saying anything of the kind. Of course it's not impossible to replenish a depleted account, but depending on your overhead (mortgage, college, car, insurance, repayment of loans, children, etc. etc.) it can be very difficult to replenish a $10,000 drawdown. Sure it can be done, but depending on your income level it may easily take 6mo? 1yr? longer?

And investing all your remaining capital into 100sh of NVDA may not be the smartest means to prevent further drawdown.

 

[def]

michaelday,
I haven't rec'd a 100% definative answer yet regarding the new rules, but the feedback I rec'd so far has been: IB is against the new rules. However, due to regulatory precaution, it will take a conservative approach to their interpretation. As the time approaches I believe a more specific statement will be released. Wish I had better news for you all.