I had responded earlier about 1000 shares today being a different ballgame than 15 years ago. Whether Prop or retail, a good manager wouldn't allow a newbie to trade 20K shares per day IMO. I started at All Tech in '96 and it was strongly encouraged to trade 200 shares per trade. We got some dirt cheap commission (at the time) of $3 for the first month or two. IMO it's all about developing confidence, building on some winning trades even if they're netting you peanuts. Stepping up too quickly to trade size and you can be like a deer in headlights if a stock tanks and a new trader freezes, refusing to take the loss. With time a trader will know WHEN it's time to increase size. I suspect most any decent prop firm, such as Bright, would also nurture new traders early on. After all they want them to succeed.
All good questions - my initial thought is that I'm happy to not have to complete with my Clearing Firm's prop traders. In reality, and with what is happening at ML/BofA (being forced to separate I'm told) - that is what is happening - restructure. We'll see... Don
Seems we're on the same page. Yeah, I remember Harvey Houtkin very well - quite a guy. And, 200 shares for $3 bucks - a bargain, LOL. May he rest in peace. One step at a time in trading, as with all business ventures IMO. Don
Let me re-phrase what I'm trying to say. A trader with 10k in capital has close to zero chance of ever making it. I know that, Don Bright knows that, Bob Bright knows that and everyone on the street knows that. This is what I was trying to get at when questioning Don about taking in 10k accounts, or youngsters as he likes to call them. Look, when I started at Worldco back in 2000, we had arguably one of the best markets in history to trade. The only way we could produce good traders was to let them go anywhere from 25k to 100k deep in the red in their accounts. Even the guys that came in with capital, usually 10k to 20k, we let them go 50k into firm money. The good ones dug their way out and did well. The bad ones we cut. Net net they never really lost that much money on them as it was mostly commissions. I know I'm not suppose to say this but the biggest fraud of the prop firm business is not commissions, or leverage, or whether or not you need a series 7, it's the fact that firms sells the dream of success to young guys that don't know any better. Well I do know better. I know it not because I'm a smart ass trying to pick a fight with Don, this really has little to do with Don in particular, it has to do with the fact that I've been in this business for 10 years and have been around over 1000 traders who have gone through the system. I know the numbers because I've seen the numbers. There is a direct correlation between the amount of capital you have to trade and your odds of success. Not leverage, CAPITAL! These numbers are indisputable. I know them, I've seen them. At the end of the day, after 10 years, I realized the biggest edge in this business is not computers, not charts, not leverage, but equity. Pure old fashioned good american equity. If anyone tries to tell you otherwise, they are probably trying to sell you something.
In the current market environmet, what do you think should be the mininum capital that a trader should have in order to have a chance at day trading success? By the term "success", I mean making enough to earn a decent living at it.
for an experienced trader, agreed. for a newbie, though, the biggest edge is actually having an edge, and the second biggest edge (assuming you have the first) is low operating costs. i started with $2500, a low rate (.0035), and most important, an edge that i had spent more than a year developing. i'd researched risk mgmt, kept my per trade risk tiny and took enough shots with low costs and was able to build that up. no fanatasy, no pipe dream, just smart trading and tight risk control. it wasn't until i was 3 years in, after building a decent roll, where i was able to leverage my experience and track record to get a firm to put some equity behind me and make some real money. at the time, bright was charging a penny in commissions. i remember that well, because i knew that i would've blown out if i had gone with them. to be fair, they were providing training on an edge that still existed at the time (the infamous opening orders). these days their value-add strategy wise is a ship that has long sailed. which just leaves costs, and truly they're easily the least competitve firm in that category and given the small-edge environment i have no idea why anyone still considers doing business with them. actually, i do: if they don't know any better. if i were running a prop today, there's no way i'd let some newbie off the street eat up 10k of my capital let alone 50. on principle alone. why should anyone with no experience, no track record, and having done no work be worthy of my risk? what i would consider, is if they came to me with a prospective edge that they'd studied, put some work into, thought about, ie shown some initiative. the only other possibility for letting someone with no experience on my desk would be to work an edge i couldn't automate. if i wasn't doing that (being discriminating), the ONLY edge i'd have as a prop firm is to milk on fees, haircuts and commissions.... which, in a highly efficient market, is a very poor business model. i wish the bright's luck.
I have to say, I don't want to tie up more than $5-10k in capital if I can avoid it and still get full service. I opened up with a firm with $5k and turned the account into six figures... I knew how to trade, but if I didn't have the chance to trade with such a small amount, I wouldn't have been able to have been successful. The attrition rate is horrible. But if you're a good trader you can take $5-10k and, with decent leverage, make $300-500/day until you build some bank up. Probably less than 3% of the guys who open at at these shops are actually capable of doing that, but it can still be done.
I agree with propseeker. Equity is not the most important thing. I knew a lot of semi wealthy people that tried to trade and lost it all. It's about having an edge. I'd rather have an edge and start with 20k than to start with 200k and no edge. I also started with low capital base and built it up over time.
No, an edge is a given. An edge with no equity will get you no where. Look, you guys that talk about spending years building your account. How did you live? With mom and dad? You need capital whether it's money to trade or savings to live on while you are learning to trade. Even if it takes one 2 years to refine their edge, so how are you living. If you live in a decent size city the average person is going to need about 30k to 40k per year and that is living like a hermit. So two years that's 60k to 80k assuming you never lose a dime trading. No sorry man you need the capital. An edge is worthless until you build the skill necessary to use it. It's like a high performance sports car. You just hand the keys to a 16 year old kid and expect him to be able to handle it even though the car itself is amazing. It takes skill to drive a high performance car. And it takes skill to refine and execute your edge. Edge itself is meaningless. I worked on the floor of the CBOE back when options had .50 spreads on the bid and offer. It was easy money for anyone that knew how to calculate synthetics. Yet guys still blew out their accounts taking unnecessary risk. There is nothing about this business that's easy. Getting an edge is not enough. I knew guys in high school that bench pressed 450 lbs and squatted 600 that ran 4.40 40's. Yet they couldn't keep their life together to handle a full ride scholarship. Capital buys you time. And every trader needs time, lots of it. It's the most valuable currency to any trader. And no, just because you have capital does not mean you have a prayer to make it as a trader. I never said that. The two things are mutually exclusive. In fact even with unlimited amount of capital your odds are still pretty small.
I guess we have a different definition of an edge. My definition is not just an idea of how to make money. My definition of an edge is that you already have the skill.