*net worth without primary house
What is a good ratio between net worth and trading account size?
- Thread starter Evermore2017
- Start date
Robert Morse
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I would also strongly consider how long it would take you to replace losses with earnings from other sources. And, the risk level you take.
If you're like most aspiring traders, you've got enough to start trading but perhaps with not all that big of a bankroll. If you're trading stock index futures and unless you've got a big bank, I suggest you start trading "ones". When you're being successful, then up it to "twos"... etc. Part of trading is conditioning yourself to the risk and the decisions to be made when you're under money stress.
Your (actual, not projected) annual return from trading is a good place to start. 10% return, 10% net worth. 50% return, 50% net worth. 0% return, 0% of your net worth.
net worth means nothing
what counts is how good of the trader one is
usually one is bad, often - one is very bad
so calculate how much u ready to lose before giving up on the method and going back to the drawing board
that procedure will probably be repeated many times
eventually most are not getting better enough to fly off the loser's nest...
they quit
if one is getting better then loses will decrease , by the time one becoming ready he usually knows the comfortable size of the position
start with comfortable size
if it grows enough then 1/3 of the profit each quater goes for taxes, 1/3 for living, 1/3 stays on the account and increase size of the positions
99% to trading. 1% for the rest.
I would say in all reality it’s too individual. For me my trading allocation is basically any money that wouldn’t require a lifestyle change or sacrifice to that lifestyle if I lost it.
Depending on ones situation I would suggest following the recommendations of having all debt paid off except House, 6 months of emergency fund, a retirement plan well underway or funded, other longterm goals funded or a plan being funded. Then take the excess beyond that and allocate it. Of course I still have income coming in too. If you don’t have income coming in I’d say even more emergency fund and a year of living expenses minimum set to the side.
Of course if you’re young and have no responsibilities “F” it go big or go home.
I wanted to add, once you’re profitable. But until then I’d say allocate the smallest size possible to trade your strategy.
I would say in all reality it’s too individual. For me my trading allocation is basically any money that wouldn’t require a lifestyle change or sacrifice to that lifestyle if I lost it.
Depending on ones situation I would suggest following the recommendations of having all debt paid off except House, 6 months of emergency fund, a retirement plan well underway or funded, other longterm goals funded or a plan being funded. Then take the excess beyond that and allocate it. Of course I still have income coming in too. If you don’t have income coming in I’d say even more emergency fund and a year of living expenses minimum set to the side.
Of course if you’re young and have no responsibilities “F” it go big or go home.
I wanted to add, once you’re profitable. But until then I’d say allocate the smallest size possible to trade your strategy.
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This should be the other way around. The bigger the return the strategy is more likely more risky, so less net worth should be commited to the account.
For example, 300k of capital: 50K in cash, 75K in trading account and the rest in CDs, only 25% dedicated to trading.
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“Speculate with less than 10% of your liquid net worth. Risk less than 1% of your speculative account on a trade. This tends to keep the fluctuations in the trading account small, relative to net worth. This is essential as large fluctuations can engage {emotions} and lead to feeling-justifying drama.” Ed Seykota.
Risking no more than 10% of your liquid net worth & keeping the margin-to-equity under 20% seems to be advocated by some of the best old timer traders.
This is obviously geared more for wealth management.
Risking no more than 10% of your liquid net worth & keeping the margin-to-equity under 20% seems to be advocated by some of the best old timer traders.
This is obviously geared more for wealth management.
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Evermore..Your thinking like an investor. When speculating it should be with money you can lose, while expecting a minumum of a 25% return after labor.
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