Using Margin for day trading

Quote from intradaybill:

I have been trading futures and forex with no use of leverage for a long time, I don't make a lot but I enjoy my trading and I sleep well.
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Who do you use for your forex broker if you don't mind me asking?

Geoff
 
Quote from NoDoji:

I'm still in my first year trading, made some really dumb mistakes, never dipped into my day trading margin, and have averaged $750 a week this year on a $60K account.

Nobody here can tell you enough times the value of managing your money. Josh Lukeman's book "The Market Maker's Edge" has superb opening chapters on position size and risk management.

I will tell you this from experience: If you always put in a stop at a max loss that's a very, very tiny % of your account, and you never move that stop EXCEPT in your favor, you can spend quite a bit of time making bad trades and still stay in the game. Armed with this kind of discipline, if you develop even a small edge, you will be profitable without using margin. As another poster here said, only once you are extremely consistent and disciplined on EVERY trade for an extended period of time, should you consider using margin.

Learn to love losses as long as they are a lot smaller than your gains. If you can take a loss and consider it a win ("I saved myself $500 by taking that $200 loss instead of waiting for my trade to turn around."), then you have a great chance of making it.

One of the biggest killers of accounts is your personal beliefs about price. The market is ALWAYS right. There is no such thing as "too high" or "too low" for a stock or index. Say you shorted 500 shares of GMCR @ the YTD high of 55.67 late April after it made new 52-week highs day after day between March and the end of April, had gained over 140% since November, and had a P/E ratio that was quite bloated. What did your account look like the morning of April 30th? If you managed to get out right at the open, you were only down $3100. But if you held your position for even 5 minutes that morning, the smallest loss you could've got away with was $7000. And if you kept thinking it would certainly come back down in a few days, the smallest loss you would've managed since was $10,300. Still holding and hoping as of yesterday? -$17,800

Suppose you used your 2:1 overnight margin and held 3000 shares short because this was gonna be a home run, and you held the position for 5 minutes that morning hoping for a reversal. Your $100K account would be nearly cut in half. Many years ago an acquaintance of mine was doing well day trading and he started using his 2:1 overnight margin to swing for the fences. He held some huge positions on margin while he went on vacation in October of 1987. Black Monday wiped out his entire net worth. He lost everything.

As a new trader, avoid using margin, you won't need it with a $100K account, even if you're trading for a living. Work on getting a ton of screen time so you learn to recognize the footprints left behind by the crowd. Soon you'll get to the point where, when you see those footprints, you'll have a good idea of where the crowd is headed next. This will be your trading "edge". Combine that with absolute discipline and you will succeed.

You can find an excellent example here of a great trader who's had more losses than wins this year and who's account is up 35% YTD based on absolute unshakable discipline, a very simple strategy for entries, and a 2:1 reward/risk ratio: http://www.elitetrader.com/vb/showthread.php?s=&threadid=148752&perpage=6&pagenumber=1

Best of trading to you!
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Excellent advice.
 
Quote from DuyLe:

Hi, i am a new trader. Any recommendations for using margin? I am starting out with 100k. I plan on setting up a long term portfolio while at the same time day trading. I get 2-1 for my long positions and 4-1 for intraday. Any suggestions on how I should use margin for starting out and then expanding as I become more accustomed?
Duy.
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A trader must use 75% margin of total deposited money. i think so your broker doesn't provide much margin, because many forex broker provide 20 times margin. consult with your broker other wise go for another.
 
Quote from DuyLe:

Hi, i am a new trader. Any recommendations for using margin? I am starting out with 100k. I plan on setting up a long term portfolio while at the same time day trading. I get 2-1 for my long positions and 4-1 for intraday. Any suggestions on how I should use margin for starting out and then expanding as I become more accustomed?

Duy.
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Learning is based on doing what is required to build your mind.

If you are able consider that, relatively speaking, you have all the time in the world.

Any trader can have any life style he prefers. Becoming a trader requires one single kind of effort which only takes some time.

It is similar to learning to read or do arithematic. It is very kindred to becoming accomplished in music.

All the above tells you quite simply that margin is not on the table.

Where you to learn music, you would focus on one instrument at first. When you became accomplished you might branch out a little.

Beginning to trade is best done with position trading stocks. This is a simple repetitive task that uses several streams of capital (no margin) and in its simplest form involves a trading plan and a business plan. As in all learning, the beginnings are simple and a foundation is laid.

Position trading is mostly automated and takes little daily time except for the fact that you put in time to compress the learning curve. The learning curve depends upon you more than anything.

Consult your business plan to see when you first double your applied capital. At that time remove the applied capital and use it for another purpose. From this time onward you only trade with profits.

As you become accomplished in position trading stocks you will find out that all other instuments can be traded to same way but on different and usually faster fractals. This knowledge tells you that you do not have to trade full time to have any lifestyle you desire.

Look at you business plan and see when the time comes where you do not have to trade full time anymore. It will be a time when you position trade quite seriously and you make most of your needed life style budget money from a short period each morning trading futures.

At this point, you may decide to trade more each day, since the market is still offering. You may also decide to position trade larger amounts of capital and even trade both commodities and stocks at their repsective intraday and position trading limiting capacities. It is a nice experience to have for the record.

If you do decide to keep money, then you will have to learn a third trading method that handles unlimited capital: Stock Sector Rotation.

Those who keep money and show their wealth often attract the attention of others who need their capital managed. If you cotton to that, then you need to use margin for yourself and for them.

Lets look at what you will do instead. You probably with put more than the smallest amount of money into the market as you learn. You may not focus on learning but, instead, focus on making money. You may not create the 100 plus page business plan or pick up a ready made business plan from the web. You may not create a trading plan for position trading nor a trading plan for futures commodities trading intraday. You may not get a mentor who could give you all these things either.

A lot of noobies feel they need to invent. You may invent too.

As you go along you may spend time collecting pieces here or there. It is the usual thing for thocse who do not have a learning plan. You may skip creating or finding a learning plan.

The one very important thing about learning to trade is the "Answer Sheet" for the questions that come up. There is also the minor issue of the questions themselves. Some questions do not forward the asker but only take the asker on a detour.

Here in ET everyone builds an autobiography. Some are given biographies by those who do not even know them. So I've started your biography as you see above. There are many forks in your path ahead.

Scan a page from your daily journal and post it.
 
i totally agree with youngone, take 75k put it in a money market and trade with the 25K, and only trade in lots of 100 for stocks and 1 lots with commodities till you are profitable for at least 3 months then you can raise your contracts or shares by a factor of 1 for every week that you do good. then reset at the end of month to 3 lots or 300 shares till you get in at least 12 months of trading in full time.
 
If you are serious, and want to really make a living, go pro, take your series 7 and save 75k for your first year's living expenses and trade your portfolio with real leverage instead of losing your money trading retail.
 
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