Trade for living-how much $ do I need??

I like you and I would assume most people around here are working toward the goal of trading for a living. After attempting this once before (with no expenses beyond geting married in about a year) I fell flat on my face. Of course I was a total newbie and had only heard of trading about a month before and figured I could start with much less than what you are. Ignorance is bliss until reality hits.

On my second attempt around (and a little wiser to the ways of the market that I trade as well as having a wife and two kids) I have figured that with my current performance I would have to have at least 100k before I go full time. Even in this scenario I would probably only do it if my wife was working as well (steady income and insurance). If she isn't working then I would want about 150k - 200k.

The 100k will allow for living expenses as well as growing the account. Without account growth you would be fighting a losing battle. All it takes is one or two months of not hitting your target and you could be done for good. Your account would shrink to pay bills and then you do not have enough capital remaining to create as much income as your were planning on so you have to take more out of the account to pay bills. The process continues until there is no more left.

This is my scenario and I am sure that your situation is different, but with only 20k and a wife and kids you are setting yourself up for failure. If you had no expenses and no obligations it might be a different story.
 
Quote from Virtuoso:

Lets say you have 2 1/2 times what you have now 50large and you manage to return 100% on your money (very unlikely).

50k - the mans take - your yearly nut of 24k and your equity is not much better off then where it started the year at :( And you might be saying "hey thats not all that horrible - I make 50 large now at my 'day-job'". But now here is the reality of the situation 1)100% per year is not an easy thing to do and I would venture to bet that less than 1% of the people who play this game can do it for any lengthy amount of time (small account or not) and 2) It is 100 times harder when your nut is coming straight out of the market and you have a wife and child depending on you. Now how much do you think you need to take a legitimate shot at this?

I personally had 60-70k when I started and was lucky enough to not only survive, but to make a decent size stake out of my account in just a few years. But looking back on it now I realize it was not a very good bet. I took way too much risk and to be honest didn't really know shit about the game. I was born on third base in the middle of a bull-market and had mistakenly thought I had hit a tripple. Play the same scenario back a 100 times over 100 different time periods in the market and I am smart/humble enough now to realize I would have fallen on my face 85 times, play it back with a family and it would be more like 97 times.

IMO it takes min 100k to make a legit go of it with 200k being the more ideal for anyone who wants to do better than just grind out a small living; ie. accumulate wealth...
Good luck...
More...

Very well said. I agree. It is hard enough to be consistently profitable. Yet, if you need to drain your account for living expenses, you have absolutely zero chance of making it with a 20k account. Not when you are new to the markets. For somebody who knows what they are doing and have learned the hard way, then you might be able to make a living out of a 20k account. You need a second income. Period.
 
suppose you were to join a prop firm who gives you 4mm in buying power, asks you for no capital contribution, and your goal was to make 300-3k a day?.......just a thought.


grimer11
 
Quote from qwiktrade:

jim..

this is how you can answer your question..

1.) Define your edge. What is the win/loss % and what is the Risk/ Reward.

2.) Get an average of how often this edge occurs every week.


If you are trading a 60% ES system with 2 pt stops and 4pts reward then the math comes up like this..

2pt stops on 1 contract is 100.00 dollars.. this is .005 of your total account.. this gives you an acceptable risk of ruin up to 4 contracts if your win rate is in line..

Now, take your total average edge occurrances for the week and divide by half.. you wont see them all.. for example.. if you get an average of 20 signals a week, use 10..

4 losses * 2pts = 8pts
6 wins * 4pts = 24pts
------------------------------
16pts *50 = 800.00
Commish = (assume 5$ roundtrip) 50
------------------------------
total expectancy per contract per week is 750.00

of course, this assumes that you:

1.) Have a system
2.) Trade that system perfectly

It is very important to be honest with yourself about what you are doing.. dont pretend you have an edge just because you read a book or two.. Also, you cant create an edge based on how much money you want.. look for something repeatable and define it in terms of average stop needed and average profit target..

This is a business, nothing more. People open businesses every day in america with 20k, 100k, 500k, and 5k.. Those who have no plan and dont work extremely hard might as well spend the money on a good vacation.. Only those who have a plan and work to implement it have a shot.. Trading is no different..

This isnt easy (in case you are under the illusion that it is a short cut to hard work).. You will pay a high price to become good in this profession..

Good luck..

-qwik
More...

Your post would be spot on if we were dealing with a static market, but the market I have come to know over the years is a living, breathing, dynamic, everflowing organism that takes the utmost pleasure in transforming an "edge" into a thorough exercise on chewing cactus. I know you know first hand what it is I speak of...

Nice to see you posting again Qwik, its been some time...

PEACE and good-trading,
Commisso
 
Quote from grimer11:

suppose you were to join a prop firm who gives you 4mm in buying power, asks you for no capital contribution, and your goal was to make 300-3k a day?.......just a thought.


grimer11
More...

And how is that path working out for you thus far? ...... just curious.
 
Quote from Mecro:

Best advice in this thread.
More...

Good call. I was thinking about having in my trade account but I think I'll have to have it in a money market or in my checking so that it's liquid.
 
Quote from qwiktrade:

jim..

this is how you can answer your question..

1.) Define your edge. What is the win/loss % and what is the Risk/ Reward.

2.) Get an average of how often this edge occurs every week.


If you are trading a 60% ES system with 2 pt stops and 4pts reward then the math comes up like this..

2pt stops on 1 contract is 100.00 dollars.. this is .005 of your total account.. this gives you an acceptable risk of ruin up to 4 contracts if your win rate is in line..

Now, take your total average edge occurrances for the week and divide by half.. you wont see them all.. for example.. if you get an average of 20 signals a week, use 10..

4 losses * 2pts = 8pts
6 wins * 4pts = 24pts
------------------------------
16pts *50 = 800.00
Commish = (assume 5$ roundtrip) 50
------------------------------
total expectancy per contract per week is 750.00

of course, this assumes that you:

1.) Have a system
2.) Trade that system perfectly

It is very important to be honest with yourself about what you are doing.. dont pretend you have an edge just because you read a book or two.. Also, you cant create an edge based on how much money you want.. look for something repeatable and define it in terms of average stop needed and average profit target..

This is a business, nothing more. People open businesses every day in america with 20k, 100k, 500k, and 5k.. Those who have no plan and dont work extremely hard might as well spend the money on a good vacation.. Only those who have a plan and work to implement it have a shot.. Trading is no different..

This isnt easy (in case you are under the illusion that it is a short cut to hard work).. You will pay a high price to become good in this profession..

Good luck..

-qwik
More...

Very well said Qwik..Based on your past experience what is the average expected return (you mentioned 2 pts) I would planning for 10 points per trade trading "boring" stocks...some stocks that trade steadily...but very low margins.
Wonder what others have to say?
 
Jim do not listen to these morons that fill your head with nonsense....of easy riches and instant career.

Yes some of what they say is true but only because the market conditions have allowed it in the last 2 years.

This is a career and must be approached/treated as one, just as a Doctor or Lawyer etc .. etc...

I have been in this industry for 20 years and seen these guys come and go, they have a few good years and then most 90% blow themselves out.

Yes it is true that I have only been trading fulltime for 2 years but I was on the other side of this business as a stock broker for 7 years and as an investor for 17 (Just to set the record straight) and I have evidence if any other member on ET feels the need to challenge me.

Prop firms will give you a decent education if you choose the right one and if you are going to do this take the time to investigate ALL of them and learn the FACTS.

But I still stick to my original recommendation of learning and educating yourself part time based on your current life situation/family.

Good luck and I hope you make the right decision but please treat this seriously.

:cool:
 
I won't quit my current job until my trading account is ten times my annual wage. It may take a long time, but I like playing safe. Plus if I make a transition to a full time trader, I want to be sure that I don't go back to my job because of a couple of bad months.

DVB
 
Jim:

By the time you are ready to actually trade for a living, you will have already answered your question for yourself. What I mean by that is that you will already have developed one or more systems or methodologies that you have traded and perfected for a while and that you will know exactly what to expect from these systems. For instance, I have traded my main system long enough to know that it cycles once about every three weeks, that it takes about 6 steps forward and 4 steps back (net gain of about 2% per cycle). The greatest drawdown of my system has been 12% of equity so far, which occurs in times of market panic. Based on those behaviors, I can easily calculate the amount I will need to be able to make a living off of my system. EVEN THEN, I have not done the calculations because I am not so naive as to believe that this system will continue to work on the order of years instead of months. I had a favorite system a while ago that I used for many months and thought would never fail, and then it started to go bad as the underlying market conditions began to change. After two months of severe losses, I was totally demoralized and finally had to admit that my favorite system was no longer working--I've never felt worse about trading than then, and I wasn't even trading money that I relied on for sustenance--it was all "throw-away" money that I could do without!

Seriously, you have got to practice a lot more and learn your technique/system/methodologies inside and out. You should know how your system as well as you know how to walk, because even when walking, sometimes you will trip and take a bad fall. The key is creating consistent results and being able to take the stumbles that will occasionally occur, and for that, you have to be "walking" your techniques in the market for years.
 
You must log in or register to reply here.
Back
Top