Trading without depositing all funds to a broker

p0box4

p0box4

Wasn't really sure where i should post this so .. If it is wrong, please excuse me.

What i was thinking about is instead of depositing all available funds to a broker is keeping the majority in my bank account and only a small part, lets say 10% as a deposit with a broker.

So for example if i do have 100K available for trading, i would deposit 10K and keep 90K in my bank account.
I would still manage the trading account as it would be a 100K account, so let's say if my profit target would be 5% a month on a 100K, i would like to make 5K with the 10K account.

I do realize this sounds very unrealistic, as it would mean 50% from the actual deposit, but if you look at it as a 100K account, it isn't anything abnormal, right?
With my system and money management i most like will never open a trade larger then 5 contracts on crude oil or mini s&p or mini NASDAQ, so no problems with margins either.
Of course when going trough a draw down or going below the 10K i would add additional funds.
On the other hand i would withdraw all profits every month to the bank account and only leave 10% of the total funds available in the trading account.

I am looking for anyone of you who have any experience with trading like this, if anyone ever tried it or just your opinions whatever it may be.
 
Quite a few people do this. It's not a big deal and acceptable as a way of using leverage to guard yourself from an FCM insolvency (eg MF Global).

If you have a black swan situation that requires making the broker whole then you simply do that. But its better you oweing them than them oweing you.
 
Ruben De Kock said:
... instead of depositing all available funds to a broker ... keeping the majority in my bank account and only a small part... with a broker.
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:) I do that. In a way. I consider it psychologically helpful even though there's the risk of making the attitude towards losses too cavalier, in the absence of a strict trading system approach (that's me). More practically it also has the advantage of protecting your capital from extraordinary adverse excursions and consequent margin calls, esp. if your broker waives negative balances like mine does, or if you have sufficient hair on your stomach not to pay for one.
Of course the account refill would take some time. One day in my case. Ultimately it is just a form of Stop Loss and oversize protection. A hard one.
Go right ahead, smart, original thinker! :)
 
mmt said:
Which FCMs allow you to deposit a fraction of your margin requirement?
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That is a very good question.
In fact you raise your leverage again by 10 times. And how can the FCM check if you really have the 90% in your bankaccopunt and that it is your money? On top of that how can he get this money in case you make big losses? FCM's who accept this are idiots and put the money of other clients at stack. If you hear about such FCM's you should leave them immediatelly as they will use YOUR money to save money for other clients when things go wrong.

Is there no legislation about margins?

And one additional thought: if a FCM does do this for you it will do it for others too. This means that the financial stability of the FCM is in danger. In other words: if other "idiots" lose big the FCM should pay for it and might go broke. In this case you will lose your money too.
 
mmt said:
Which FCMs allow you to deposit a fraction of your margin requirement?
More...

I assume this is another newbie that been mislead by fake guru/marketing/online seminar into bucket shop that provide the ridiculous leverage.

The only thing the newbie never thought of is the ridiculous slippage (spread) and the overnight holding fees that the bucket shop that charged them, which eventually take away all their edge in long term.
 
i am nobody said:
That is a very good question.
In fact you raise your leverage again by 10 times. And how can the FCM check if you really have the 90% in your bankaccopunt and that it is your money? On top of that how can he get this money in case you make big losses? FCM's who accept this are idiots and put the money of other clients at stack. If you hear about such FCM's you should leave them immediatelly as they will use YOUR money to save money for other clients when things go wrong.

Is there no legislation about margins?

And one additional thought: if a FCM does do this for you it will do it for others too. This means that the financial stability of the FCM is in danger. In other words: if other "idiots" lose big the FCM should pay for it and might go broke. In this case you will lose your money too.
More...

Agree. How can others know whether you have the other 90K? What's the logic behind this great idea? Why not deposit all 100K and set a max loss to control risk?
 
Green Hand said:
Agree. How can others know whether you have the other 90K? What's the logic behind this great idea? Why not deposit all 100K and set a max loss to control risk?
More...

Not putting all the capital in is actually a smart move:
you control the losses by also using your broker, as the broker controls
the capital maximal loss.
 
smallStops said:
Not putting all the capital in is actually a smart move:
you control the losses by also using your broker, as the broker controls
the capital maximal loss.
More...

Deposit 10 times instead of once, right? If I am not wrong, what he wants is to use 10k to get BP as he puts 100K. Assuming a leverage of 50x, normally he can only get 500BP if he deposits 10K. But now, he says that I have another 90K in my bank account, I wanna 5000K BP. The equivalent method is to ask for a higher leverage. Am I wrong?
 
If he is seeking high leverage, normally it means he is going for super high risks / high rewards.
Then it makes total sense to limit the possible capital loss, by managing the account "reloading/withdrawing".
 
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