Trading, Taking and Income, and Capital Requirements

So anyways, back to the point of the thread ... take any one of those programs (honestly, who cares what they are doing, to the point of the thread) ... and look at their DD numbers.

Then work the math, of the Capital it would take, with those DD's ... then living expenses ... and figure the Capital it would take to take a draw ... and continue to trade the Capital and grow it.
 
Ps. I am not to sure why you are lying. There is no such firm as Blue Sigma and if you meant Two Sigma I will bet every dollar that you don't have access to them. You lost your mind dude.
 
Thanks for the link mickey. I knew he was going a bit nuts.
BlueSigma Capital provides global alternative asset advisory and fundraising services across Private Equity, Real Estate and Hedge Funds.

Leveraging on 15 years of global alternative asset and distribution experience, BlueSigma Capital knows the investment preferences of the world’s largest institutional investors.

Coupled with deep client relationships, our breadth enables us to customize high-quality solutions for the needs of our clients.
 
raVar said:
So as to not derail the thread ( https://www.elitetrader.com/et/thre...egy-trading-journal-that-shows-profit.337303/ ) where this topic came up? I thought I would start a new thread here.

When it comes to the topic of Professional Trading? Inevitably, the topic comes up ...

How much capital do you need? To live on, and still trade?

A few key posts from folks in that thread ... to this particular topic ...

In the whitepaper in that thread, it states:

"Earning an income from trading a smaller retail account, will require a much different approach than say, growing an account with a single intra-day trading process. Of course, that would require that new retail traders understand that mathematically, they will never, ever be able to pull in a living-income from a small $25,000 trading account. We have found that many refuse to accept this truth. And it is truth. It is not opinion. It is mathematical fact, that has been proven time and time again that you cannot pull a living-income in from a such a small retail trading account."​

To that statement? The following replies are key ...



As well as ...



As I stated in the other thread? I think this is a fantastic topic. And excellent points made by both of the posters above. I'm really glad they said the above, because it's critical for aspiring traders who wish to trade from home as their sole income (Professional?) to understand.

So again, so as to not derail the topic in that thread too much? Let's discuss it here.

So here's the points that I would offer for consideration.

1) Discipline and a great strategy do not matter. $25,000 is too low, for the best traders on this Planet ... because

2) Of Drawdown. Even on the best, of best strategies.

When Drawdown enters the picture? Which every strategy on this Planet experiences ... it quadruples the problem.

So you can have a fantastic strategy. A BEAST of a strategy, that beats most traders on this Planet. But each strategy has a Drawdown Metric.

Every.

Single.

One.

And if you have to take a living from a strategy? A "Draw"?

Then, when you experience inevitable drawdown? Or even a flat month, or two flat months in a row?

You are automatically exercerbating your problems of taking a draw.

That's before we even get to Taxes, Slippage, and Commissions.
More...
$50k is actually ok
 
Bankmanagerkuwait said:
$50k is actually ok
More...

Ok, now there's an interesting starting point.

I know one pretty talented Options Trader outta Chicago, who says he could do it on $80k. I thought that was stretching it; but I could see him pulling it off. Nor does he do it on $80k. His pile is actually larger, but he says he could do it on $80k. Like I said, I thought that was stretching it a bit. But I don't know, because I don't know everything, nor what different folks do to stretch the envelope. That's the critical component.

My stance, is that one should at least have $150,000 before trying it.

I'm not sure what ones would use for a variable for the draw per month for living expenses? $10k a month would obviously be too much for even $80k. Heck, even for $150,000.00; taking $10k a month ... just wouldn't work. So down to $3,000 a month? Could one live on that little or even less? Is that even doable? What I mean, is it possible to cover your living expenses on such a small amount? (At least here in the U.S.?)

Without a process that can give you an 11-Year Sharpe north of 2.0 while Simultaneously Annualizing ... maybe 20%?

I just don't see how the math would work. Maybe I'm wrong somewhere.

Even for just $3,000; with a $150,000.00? I don't see how it could work. At $150,000 Trading Account, I figure one could at least start to take a small draw to supplement whatever other gig they have going on.
 
$500,000 is the number at which I will consider living off of trading income...but even then I doubt I would. My trading is 100% automated. I rather earn risk free money and allow my risk capital to continue to grow or plow the profits into other investment vehicles.
 
fan27 said:
$500,000 is the number at which I will consider living off of trading income...but even then I doubt I would. My trading is 100% automated. I rather earn risk free money and allow my risk capital to continue to grow or plow the profits into other investment vehicles.
More...

That's more where I come out, and is a secondary excellent point. One I hadn't actually thought of before you brought it up.

The second you're even trying to do it at even $150,000? Even with one of the best strategies out there, you're destroying your ability to allow the risk capital to grow and compound. IF a person was that talented? They'd have to perform, perfectly ... always ...which as any real trader knows ... just doesn't happen ...

While simultaneously sacrificing the ability to grow that $150,000 into 10 Mil. With those impossible conditions? You stay flat ... forever.
 
Not defending the "make a living on $25k" guys, but it's worth again pointing on the difference of managing hundreds of millions in assets versus less than a million. In the latter case you get away with entirely different strategies because of how quickly your size can be filled.

There seems to be a weird "income" thinking among some prospective traders though. Like, you can have $25k in an account and get massive leverage on that, then withdraw all excess profits every month and spend them (sans taxes). Not worth it at all from a risk perspective and it will end in tears.
 
Snuskpelle said:
Not defending the "make a living on $25k" guys, but it's worth again pointing on the difference of managing hundreds of millions in assets versus less than a million. In the latter case you get away with entirely different strategies because of how quickly your size can be filled.

There seems to be a weird "income" thinking among some prospective traders though. Like, you can have $25k in an account and get massive leverage on that, then withdraw all excess profits every month and spend them (sans taxes). Not worth it at all from a risk perspective and it will end in tears.
More...
I think that paradigm is probably what caused me to write the original post in the first place.

And yeah ... it probably is a mode of thinking. I think they hear about Asset Managers, pulling in a beautiful living from trading. Ehhh ... as we know ... sorta, but not really. Those Asset Managers are pulling in a beautiful living from managing tens of millions, and pulling in a fee for that service. Then they are told about "some guy" that "struck it rich in the stock market" and put those two things together and they are off and running thinking ...

"I'll just quit my job, and trade my $25,000 from home, because I'm disciplined! I can do it!"
 
You must log in or register to reply here.
Back
Top