Account Risk

Discussion in 'Trading' started by joaaquinn, Nov 3, 2012.

  1. Hi sorry for the one who already have seen this message in other forum, I wanted to move this message to this forum but I cant, so I had created a new one.

    I am new and I plan to start trading. I will to day trade stock fom SP500 which have an average volumen of 500000 shares per day or more. I have a paper account on IB and after some months I plan t move to a real account.

    I have a margin account. I plan to use up to 1:2 laverage. What are the risk of losing all money? I mean, not all money in an large amount of time, will take care of that and won t happen.

    Could happen something in one day that make me loss all the money? Lets take and example that I have 1000 share, 50 per share. Could happen something that will decrease tha value of th share from 50 to 10 for example? Talking about probabilities. I think this is unlikely but let me know.

    I will only day trade not hold any position longer than 1 hour. Put always stop loss.

  2. mutluit


    you lack trading experience to have/use a margin account.
  3. thats rather obvious.... he is using a paper trading account though... why not tell the guy what would be a good path to take to learn how to trade...?
    what does telling him he has a lack of trading experience do for him?

    my first suggestion to you is start asking what books you should be reading.. and ask what people are trading that are suggesting those books.. your gonna end up gravitating towards a style that best suits your personality.. depending how risk seeking or risk adverse you are.. Don't ever think any seminar is worth anything but the refreshments you get there.. anyone that trys to ask for money to help you isn't helping you at all..
  4. Right... and how in the hell does make sense?

    Take the training wheels off first before you think about getting a crotch rocket.
  5. mutluit


    I mean: a margin acct is dangerous for a newbie. a newbie better should trade on a cash-acct basis (no leverage and no shorting) for a while until he is not a newbie anymore...

    A cash-only account has the above said limitations, but using Options one can overcome them: buy long Puts (ie. similar to shorting),
    and one can achieve leverage too by doing the math of how many Calls or Puts one buys, together with the other parameters like
    Strike price and maturity (expiration) etc...
    OTOH: options require a much more skilled trader...
  6. you can't trade options with out a reg T margin account.. at least not that i know of.. and how are you talking about options if your talking about him being on a cash basis without leverage? thats crazy.. first thing i would suggest is.. stay away from daytrading.. swing trade... only add to your positions when your right.. never martingale ...
  7. mutluit


    For buying (not writing) Calls and Puts a margin account is usually not necessarily required; cash acct is enough.
    Here's more info:
    Options Account Trading Level 2
    Trading level 2 allows you to buy call options or put options on top of what Trading Level 1 allows you to do. This is the level most beginners to options trading start at. At this level, options traders can only perform simple directional speculation by buying call options or put options without the flexibility of writing them or using them as part of a spread. Risk is therefore limited to the amount of money put towards purchasing the options.

    I know options are nothing for newbies, I just wanted show all possibilities.

    I second your advice re daytrading vs swing trading.

    Martingaling (averaging down) one should use only if one is 99+% sure about the future direction of the traded item as one so quickly runs out of available funds... ie. a very good money management is required for this...
  8. Hi all,

    I have a margin account but can trade without leverage. Am I right? So, doesn't really matter if I have a margin account and I only trade with my funds without using leverage this will be the same as a cash account. Or I'm missing something. Sorry for the ignorance, but I think that ask and study is the way to go.

    I think I will start with no leverage at first. But not really sure how the amount of risk will be increased using a 1:2 leverage. Let's say I have a funded account for 30000, using 1:2 leverage will be 60000. Let's supposed that I'm long with 1500 shares at 40 per share.

    So, the amount in the worst scenario that I will loss is 60000. I'm right? Taking into account that I trade SP 500 stocks, volumen > 500000 / day , using very tide stop loss, never hold a position for more than one hour, never leave the computer when I am holding a position. What is really the probability that I will loss such a amount of money in one day? Even taking into account some special days like the May 6, 2010.

    I want to minimize risk, I think I will pass the leverage at the start.

    I'm already paper trading with IB, but I know that trading with real money is different so I want to know all the risk and their probabilities.

    Thanks very much.
  9. you can only lose 30k in a 30k account.. margin or not.. yes you can just use cash in a margin account.. if your swinging 60k around in a 30k reg T margin account a draw down of 50 percent will wipe you out completely..
    that being said.. learning to place stops and how effective they will be depending on the instrument your using will be different.. trading very small lots on currency with bracket orders is a good way to define risk.. buying call or put options is another good way to trade in a defined risk way.. options have more to them then you need to look at right away. but inevitability you should learn about options.. Currency you can trade as small a size as you really want geneally speaking and its very hard for you to get blown out if your not martingaling.. meaning you place stops and define your risk completely.. equities is different because you have alot more jump risk.. unless you are opening and closing a position daily.. which is what i suggested not to do..
  10. nobody knows the prob of blowing up - only that the number is above 0 and is much higher if you use margin

    never leaving your computer when you're in a trade means nothing b/c the stock could blow through your stop, the internet connection/power could go out, broker go down, etc.
    #10     Nov 5, 2012