I ues three separate accounts, each allocated to a different time frame played off their respective charts only with appropriate stops. Weekly, daily, and intraday accounts. 50 % of capital allocated to the weekly, 30 % to the daily and 20% to the intraday. These are all with different brokers. I may be long daily but short weekly, a different perspective is required for each timeframe. I'm a purely directional trader in index futures, no hedging or arbing.
Trading with $500,000.00
- Thread starter Harry123
- Start date
Banjo
Just out of interest - does that mean you keep individual trade risk consistant between the accounts - e.g. if you decide your max trade risk is 1.5%, then in the intraday account that would equate to never risking more than 0.3% of your total capital per trade (20% of 1.5%) ?
Just out of interest - does that mean you keep individual trade risk consistant between the accounts - e.g. if you decide your max trade risk is 1.5%, then in the intraday account that would equate to never risking more than 0.3% of your total capital per trade (20% of 1.5%) ?
Banjo very nice idea..seperate accounts would add alot towards maximizing usage of trading capital..thank you.
Here is another thought to ponder...we all know there are always other traders who have more money in their trading accounts then us...for example Mezzanine stated "500K isn't necessarily alot of money today. There are guys who have ben trading for 8 years with a hell of a lot more than 500K." Here is my point those with a hell of alot more than 500K lets say they have 5-10 million for arguements sake. Exactly how did they deal with the psychological barrier of keeping the same % of capital at risk consistently per trade as their account grew versus the the fact that the absolute amounts at risk per trade started to become the monthly salaries of people around them for example. In other words in order to consistently grow your accout on a percentage basis you have to be willing to risk higher "absolute" amounts per trade there is no question on that in my mind. Exactly how a trade confronts that point in their career and resolves that problem is the issue at hand...once again thanks again for all responses.
Here is another thought to ponder...we all know there are always other traders who have more money in their trading accounts then us...for example Mezzanine stated "500K isn't necessarily alot of money today. There are guys who have ben trading for 8 years with a hell of a lot more than 500K." Here is my point those with a hell of alot more than 500K lets say they have 5-10 million for arguements sake. Exactly how did they deal with the psychological barrier of keeping the same % of capital at risk consistently per trade as their account grew versus the the fact that the absolute amounts at risk per trade started to become the monthly salaries of people around them for example. In other words in order to consistently grow your accout on a percentage basis you have to be willing to risk higher "absolute" amounts per trade there is no question on that in my mind. Exactly how a trade confronts that point in their career and resolves that problem is the issue at hand...once again thanks again for all responses.
Here are my thoughts:
Jumping from trading 100k to 500k is just plain stupid. Like racing a Go-cart vs Nascar. So consider trading for the next year with 200K. Take the other 300K and do something else with it.
Now the next question is a matter of method and risk. If you are trading MSFT, doubling your size is should not be a problem. If you are trading a low volume stock like COBH, then doubling size is not practical.
If you are taking positions, just because you have 5 good set ups to trade, it does not mean you will have 10. It is more likely that you will have 5 and LOOK for 5 more, financial suicide.
Regards,
Jumping from trading 100k to 500k is just plain stupid. Like racing a Go-cart vs Nascar. So consider trading for the next year with 200K. Take the other 300K and do something else with it.
Now the next question is a matter of method and risk. If you are trading MSFT, doubling your size is should not be a problem. If you are trading a low volume stock like COBH, then doubling size is not practical.
If you are taking positions, just because you have 5 good set ups to trade, it does not mean you will have 10. It is more likely that you will have 5 and LOOK for 5 more, financial suicide.
Regards,
Hi Hary123...Let me see if I can shed some light on this issue. First of all your correct in stating that it is an issue that is almost never discussed. I no of many beginning traders that lets say start out with 25k in their accounts and they run a spreadsheet projections that if they keep making 50% per year they will have upwards of 10million dollars in xyx amount of years. Many educational places such as Prisitine will teach traders of where to buy or sell a stock and where to place a stop. The biggest weakness of a place such as Pristine is they never dicuss how much capital to risk and never discuss the inevitable fact that once your captial increases to a certain magic number..(which is different for all traders) you begin to balk at placing the same % of capital at risk per trade becaue the absolue amounts on the line become to psychologicaly large for that individual to deal with if the trade should get stopped out for a loss. It then becomes a situation as you have implied that the yearly % gains on the account diminish as the total pool of capital becomes "underutilized".
Lets assume that the entire 500K is risk capital as you have stated. Now along those lines it seems that the answer would have to be that you MUST continue to risk 1-2% of capital per trade example (5k to 10K) per trade in order to maintain the % growth per year. There is no other way. If your trading methodolgy is consistenly profitable year to year as you have stated in your original post then the market will not fail you or conspire against you because are risking higher absolute amounts..its the old saying in blackjack.. "Play the cards not the money". The most important point to keep in mind is how much drawdown are you willing to accept when you encounter a string of statistical losses which is inevitable when trading. With that in mind lets say your maxium drawdown your wiling to accept on a 500K account is 50K. Then I would say risking 1% per trade is acceptble as you would need 10 clean losers stopped out in a row to have that happen. In other words you have to allow your system to statistically keep doing what it has done in the past and that is to steadfastily increase your equity over time. If you want to become a trader with 5million in your account along the same timeline that you progressed during the first 1-5 years of your trading career no other path will do it for you.
For example lets say you just swing trade...and you are going to go long the QQQ for 5 days or so...lets say you buy at 26 with a stop at 25.5 and a target of 27 in 5 days you have to buy 10,000 shares and be willing to risk 5k if you get stopped out or make 10k if you reach your target. There is no other way..and yes this is a topic almost never touched upon because it is assumed that if you have achieved that level of trading sucess then why would you need to have this kind of advice. Or the other train of thought as this Sage person stated you will be perceived as arrogrant because the reailty is that most people dont have 500K to trade with and they don't want to hear of this kind of problem. But I have to commend you for opening this thread because I hope that all traders that are starting out will understand that this does become a major pshycological issue and needs to be openly discussed and dealt with.
You also mentioned that how do you deal with the issue that if you take a loss your losing more than the monthly salaries of those around you. This is a phsycological issue of guilt I believe..where as if you take a loss which is inevitable in trading you have to deal with the fact that you just lost a real 5K and that 5k could be put down as a down payment on a car etc etc..
This is always going to be an issue as your account grows..don't feel guilty for your success if others around are not doing as well..feel grateful and proud you are able to do what you do and contine to push forward in the steadfast way that has gotten you to where you are now.
So to summarize, I believe that in order to achieve long term consistent percentage growth on your account you must be willing to accept more absolute risk while keeping the same % risk in line with whatever account size you have.
Lets assume that the entire 500K is risk capital as you have stated. Now along those lines it seems that the answer would have to be that you MUST continue to risk 1-2% of capital per trade example (5k to 10K) per trade in order to maintain the % growth per year. There is no other way. If your trading methodolgy is consistenly profitable year to year as you have stated in your original post then the market will not fail you or conspire against you because are risking higher absolute amounts..its the old saying in blackjack.. "Play the cards not the money". The most important point to keep in mind is how much drawdown are you willing to accept when you encounter a string of statistical losses which is inevitable when trading. With that in mind lets say your maxium drawdown your wiling to accept on a 500K account is 50K. Then I would say risking 1% per trade is acceptble as you would need 10 clean losers stopped out in a row to have that happen. In other words you have to allow your system to statistically keep doing what it has done in the past and that is to steadfastily increase your equity over time. If you want to become a trader with 5million in your account along the same timeline that you progressed during the first 1-5 years of your trading career no other path will do it for you.
For example lets say you just swing trade...and you are going to go long the QQQ for 5 days or so...lets say you buy at 26 with a stop at 25.5 and a target of 27 in 5 days you have to buy 10,000 shares and be willing to risk 5k if you get stopped out or make 10k if you reach your target. There is no other way..and yes this is a topic almost never touched upon because it is assumed that if you have achieved that level of trading sucess then why would you need to have this kind of advice. Or the other train of thought as this Sage person stated you will be perceived as arrogrant because the reailty is that most people dont have 500K to trade with and they don't want to hear of this kind of problem. But I have to commend you for opening this thread because I hope that all traders that are starting out will understand that this does become a major pshycological issue and needs to be openly discussed and dealt with.
You also mentioned that how do you deal with the issue that if you take a loss your losing more than the monthly salaries of those around you. This is a phsycological issue of guilt I believe..where as if you take a loss which is inevitable in trading you have to deal with the fact that you just lost a real 5K and that 5k could be put down as a down payment on a car etc etc..
This is always going to be an issue as your account grows..don't feel guilty for your success if others around are not doing as well..feel grateful and proud you are able to do what you do and contine to push forward in the steadfast way that has gotten you to where you are now.
So to summarize, I believe that in order to achieve long term consistent percentage growth on your account you must be willing to accept more absolute risk while keeping the same % risk in line with whatever account size you have.
Everyone has to come to terms with their own comfort levels of risk and how they employ them. Your example would be a good way to approach capital preservation. I keep x$$ in the mkt. arranged in the mentioned %'s. I take anything over that off the table. One can make a very healthy living off the mkts. but as trdmac alludes, it is a fools game to think you can endlessly compound yourself into a zillionaire.
This reminds me of those 'make a million in 19 days' threads. You know make 1% a day compound on your account each day.
I used to increase my trade size by about 5% every six months until I got to a trade size that was comfortable and provided a good standard of living. My account still grows but I'm no longer keeping my %risk per trade the same I'm just adding to the 'cushion'. I think this is the norm aswell. Are you sure people risk the same % as their account grows? A person who has a $100,000 and risks 2% will not risk 2% when their account has risen to say $2,000,000. They just keep enough in their account to handle larger drawdowns and increase their comfort level.
Do you feel a 'need' to trade this $500,000? If your $100,000 is what you require for your day/swing trading then you should look to some investments over the long term. People who have 10 million accounts don't trade it, they invest it. Thats how they can make the same %return.
I used to increase my trade size by about 5% every six months until I got to a trade size that was comfortable and provided a good standard of living. My account still grows but I'm no longer keeping my %risk per trade the same I'm just adding to the 'cushion'. I think this is the norm aswell. Are you sure people risk the same % as their account grows? A person who has a $100,000 and risks 2% will not risk 2% when their account has risen to say $2,000,000. They just keep enough in their account to handle larger drawdowns and increase their comfort level.
Do you feel a 'need' to trade this $500,000? If your $100,000 is what you require for your day/swing trading then you should look to some investments over the long term. People who have 10 million accounts don't trade it, they invest it. Thats how they can make the same %return.
There is also a probability reason: as time go so goes the risk. Risk is not linear.
Just a question of psychology.....
Do you (or anyone) feel that increasing your trade size in proportion to your account size will help keep you sharp and focused - as you were when you first started out?
Is there a danger in becoming complacent when trading a risk level that continues to decrease as a percentage of your overall account?
Do you (or anyone) feel that increasing your trade size in proportion to your account size will help keep you sharp and focused - as you were when you first started out?
Is there a danger in becoming complacent when trading a risk level that continues to decrease as a percentage of your overall account?