Trading the Large account
- Thread starter jackfrost
- Start date
If by "larger account" you mean "suddenly larger", as in an inheritance or something, I would ease those new assets into the market by degrees, i.e. dollar cost averaging.
No good throwing 100% of substantial new funds into the market all at once unless you already have a rip-roaring track record on which to base that kind of confidence. Otherwise, instead of magnified profits materializing, you could be looking at magnified losses.
Don't be in a hurry, or make the mistake of thinking that a lot of fresh capital is going to make things alright. Large or small, it's still the same game it was before.
saxon
No good throwing 100% of substantial new funds into the market all at once unless you already have a rip-roaring track record on which to base that kind of confidence. Otherwise, instead of magnified profits materializing, you could be looking at magnified losses.
Don't be in a hurry, or make the mistake of thinking that a lot of fresh capital is going to make things alright. Large or small, it's still the same game it was before.
saxon
Increasing size generally means you have to increase your timeframe, and trade in more liquid markets. Certain strategies which can generate fantastic % returns on small accounts trading small size, simply cannot be scaled up beyond a certain level due to insufficient liquidity or too much slippage.
Longer timeframes (even if it is going from scalping to trading intraday swings) increase risk and volatility of returns, and often reduce % returns for smaller accounts. More liquid markets have fewer inefficiencies and much tougher competition from other traders, and therefore a lower average profit per contract. Finally, you are going to be a relative novice at the longer timeframe, so your prior skills will not matter much - you basically have to start from scratch again.
Increasing volatility of returns combined with reducing profit, in an area you are fairly new to, is not usually recommended trading strategy. However you have to do it to increase your earn. 50% a year with a 20% drawdown on $1 million is better than 200% a year with 2% drawdown on $20k.
The main problem I experienced (and continue to experience) is adjusting to this increase in risk, especially considering the (relatively) lesser experience in the longer timeframes. If you have found a genuine low-risk edge, it can be hard to give up the "easy money" in return for the possibility, by no means guaranteed, of getting a new method to work. The fact that this new method will, even if you trade it very well, have much larger fluctuations, and longer "dry" periods, can be disconcerting.
I suppose it is a bit like a professional athlete moving up to the big leagues. At home he was the small town local hero, by far the best player, and he could take it easy and still win easily. If he wants to enter the big leagues, he is going to be competing against the best, and he doesn't know how he will fare. He will definitely need to work his arse off, and develop new techniques and methods in order to thrive. There is always going to some trepidation in this situation, and many people prefer to remain a guaranteed success at a lower level rather than risk failure at a higher level. Moving up to bigger size, changing methods, and increasing your timeframe, is IMO a similar experience.
On the bright side, you get used to it after a while, and if all goes well, the extra income tends to allay any doubts you may have had. It is also more interesting to try new approaches rather than just robotically execute a method you have pretty much got down pat.
"Larger account" ?
If you think 400K is a "larger account", then I don't know if you've got enough clues in this business. Do you trade penny-stocks or what?
400K = You can just about buy/sell 100X that (yes, one hundred times) on the inside bid/offer on the mini-S&P without even losing a single tick.
400K = The price of a decent car.
400K = The price of a decent racehorse's semen.
So, I suggest you stop talking about "larger" and instead start talking about figures, as in what do you want to trade, and in what timeframe?
For example, I can hardly trade more than 6 contracts on DAX if I want to scalp for single ticks. But then, if I'm prepared to bridge 4 or 5 ticks, then I can easily trade 100-lots. So that's the timeframe question.
As for the issue traded: Again, there clearly is a big variety in WHAT you want to trade. Even if you trade stocks; If you trade a $0.20 stock with a volume of 500K a day, then chances are you'll get fried. On the other hand, if you trade MSFT or INTC, then chances are your 400K orders will hardly even get noticed by anybody.
Bro... I know people younger than me spending way over 100K for a "decent car"...
Not to mention I'll be spending a "decent" amount of money fixing my "decent car" which I crashed last week... :eek:
Automobile enthusiasm is a widespread disease, so I thought I'd throw this in here. Please don't take it personally.
By the way, you can spend $4M for a "decent car" if you like.
In fact, if you want something like a Ferrari F50 Koenig, you might not even get lucky with that...
