|
PureBytes Links
Trading Reference Links
|
RTs
For those interested in my day/swing trade cap. question, I have
anonymously posted the responses so far below:
10 K to daytrade the s&p (1 contract)
20 K to position trade 1 s&p
7 k to daytrade two contract in currencies
10 K to position trade the two contracts in the currencies.
****
A lot of that question depends on how your system is designed.
10,000 may be great, 100,000 may not be enough.
Design the system,
Test the system,
Paper trade the system,
Revise the system,
Test the system,
Paper trade the system again.
This should answer your own question. Take that $$ number and multiply by two.
If your system doen't reflect at least 7 consecutive losers, find the biggest
loss and multiply by 7 and then by two.
Use the larger of the two numbers and begin trading.
Money management is an integral part of any system so use that as your
capitalization basis. If you say you will only risk $1000 per trade, double it
and then assume 7 consecutive losers.
That would require a minimum capitalization of $14000
P.S. the reason I say double the defined risk on a trade is that we all
sometimes overide our defined level at some point.
This will help you from getting blown out too quickly if you are always
"overriding your stops"
If you do, sit down and have a long chat with yourself.
The rule of 7 comes from the statistical probabilty that a coin can frequently
be tossed and come up heads 7 times in a row. The coin can still be balanced
and have a 50/50 chance of coming up heads on the next toss.
(in other words, you might see 8 consecutive losses and your "system " formal
or otherwise might still be a good one.
****
I have posted in regards to capitalization previously. Here is a big clue,
trading is a business if you wanted to open a business lets say a small
restaurant. The bare minimum that you would need to do that would be about
$100,000. More likely it would be upwards of $250000. A full line
restaurant can be up in the millions. So if you commit only $20000 consider
it a very small business ran out of your home on a shoe string with very
low odds of success. You will find exceptions to the rule. You also could
be hit by lightening. To properly day trade the Spoo's I'd suggest about
$50000 min. and get professional guidance from a fully investigated
successful day trader before you trade.
I'm really considering just the account (Ed: not equipment). You probably
saw my post about day
trading earlier today. If you feel that you have the makings of a day
trader then go for it. I tried it and it cost me several thousand to
realize that I do not have those makings. By all means try E-minis to
start. There was no such thing when I tried day trading. I can't recommend
strongly enough that you really know what you are doing before trying this.
If I were going to do it again I would day trade stocks(much cheaper)to
start with. You can get real time data for about $25 per month from my
track.
****
To effectively daytrade the S&P/DOW you will need the below amounts to do so
effectively. Please note that these are MINIMUM amounts. You'd sleep alot
better
if you had TWICE the amounts listed below. Unfortunately, we all cant begin
trading with 50-100k accounts (which would be nice and increase your chance
for success)
# Contracts you wish to trade 1 2 3
Minimum $ to trade S&P 10,000 25,000 40,000
Minimum $ to trade S&P 5,000 12,000 17,500
How did I come up with those figures? Simple...observation of how folks trade
combined with exchange margins. I know there's lots of mathematical formulas
to figure out the above, but I cant be bothered....I'm a trader. not a math
theorist.
I try to keep things as simple as possible.
General obstacles? There are MANY. Most of them lie between your ears. (Thats
where ALL of my own personal trading demons lurk.)
You want my advice? Start out small, paper trade and mix a real trade in there
every now and then, just so you get that fun feeling in your gut. Stare at the
screen every day for months and months. Use a simple methodology to trade. The
simpler the better. Do these things and you will have a fair chance at making
money. Overtrade at the start, think you are smarter than the market....and
you will be annihilated.
****
I was interested in day/swing trading the S&P and currencies, and talked to a
group of traders who do. Their advice was to have at least $9000 to $12000 on
margin whether you plan to day or swing trade. Most traders I talked to were
program swing traders who averaged about 5 to 10 trades a month.
|