If I risk $1000, I can replace it many times a year without discomfort. With a $4 margin requirement, I can buy 250 ounces of gold. In other words, my potential gain is much larger than the loss simply because the $1000 is replaceable. A large institution doesn't have the same luxury
I totally get what you're saying, but the market doesn't care how much money you need to make it worthwhile. I didn't say shoot for 20% either, only that $500 a day on a half mill account is 20%, and that is better than most professional investors do. I dare say there aren't more than a handful of people on this site who can substantiate a better return over a period of years. I don't really care what some newbie did for a couple of months in a roaring bull market. That's like winning the lottery and then thinking you can make a living out of playing the lottery. It's ironic but this kind of market is toughest on those who actually know what they're doing. They respect the risk and aren't long enough or take profits too soon. Or worse yet, they're hedged.
Strategies you can employ with <$1M vs $100M vs $1B are 100% completely different. Some of the same skills overlap just a little bit. Comparing 'return' from a small trader scalping vs someone doing stat arb with $100M or capital structure arb with $1B is completely meaningless. And, even if someone trading from home could do something *crazy* like make $1M/year off of 100,000 I'd bet big that that strategy wouldn't be leveragable to a point where any even medium sized fund would be at all interested. Outsize 'returns' on small accounts are possible because you are correctly identifying sloppy trading from larger players. Unless you are throwing around 100M+ it doesn't even make sense to measure return.
I have some clients who spread trade the index futures against each other for a living. I would not label them "day traders" but rather swing or position traders. One client here in Chicago and two clients in Singapore are particularly good at it in fact. On the ES vs. NQ spread for example, the CME gives you a 92 % intitial margin credit to carry the position overnight. So, on a one lot spread, the initial overnight margin is $416 to carry an ES vs. NQ spread. The CME margin credit to carry the mini- Dow Jones versus the ES is 90 %. Same type of scenarios with the European and Asian stock index spreads. So, point being, you can carry spreads overnight for really really cheap capitalization. Just a thought.
Just want to show you this chart, from moments ago... How many YMs did YOU have on? $500 a day trading futures, you bet your ass!!
Markets are multi-dimensional hence two dimensions of time and profit can be difficult to handle. That would be like driving a car where four wheels are going forward and suddenly one wheel decides to go on reverse for 5 seconds. How would you handle that commotion? Trade the market, trade for trade at a time. Also margin play is the fastest way to a blow up. Infact futures and options trading is the main reason why 95% loser stats are there.
It's certainly possible - but only if you're well disciplined and have a good edge. The biggest problem with a small capital account is your fear is likely to get in the way and your emotions will run amok if you have an extended period of draw down.
I find this type of thinking to be bassackwards, personally. Develop your consistency first and the money is a natural byproduct from that. I have always found it dangerous for an independent trader to project profitability in terms of a daily income average. Just doesn't work like that in reality.