Entry Barrier

Discussion in 'Automated Trading' started by Dazuni, May 4, 2007.

  1. Dazuni


    a quick question,

    am I right to say that to enter this algo trading via internet broker (like interactive broker) one would have to have like GBP 5-6K to start?

    any thought?
  2. Whatever is the account minimum to open an account with a broker who has a suitable API for automated trading is the barrier to entry. IB might be as low as $5k I believe.

    You can then purchase an automated trading platform software (or use the one offered by your broker e.g. Tradestation) or develop your own software yourself.
  3. Dazuni


    okay 5K usd is about 2.5 to 3 k GBP, still a expensive hobby I think.

    if I have 5K usd in the account how many go do I have on the market?
  4. How many goes do you get? It's not a slot machine.

    On your first post you say that you have a stats background and work as a programmer in the back office of a city firm with access to Bloomberg?

    Something is not quite adding up here to me.

    Suggest you pick up any of the hundreds of books about trading online and read that first so that you understand at least something about what trading is.

    You can only automate something once you have something to automate.
  5. Dazuni


    well if you buy say a lot of 500 share that is $4.00 each that gives you $2k, so I think 5K will last about 2 go.

    $4.00 each is quite cheap no?

    indeed I am a programmer with stat background. I have not do on line trading before and I do have a few books on this topic.

    I just want to know more about automatic trading and what other people think on this site.

    edit: what dont add up?
  6. What doesn't add up is that you don't seem to think like a programmer with a statistical background, as TraderMojo pointed out. For one thing, you don't need any money at all to run your autotrading software: start with a simulated account. If you do decide to run in live mode, then again, you can last for a long time even with limited capital by trading very small quantities.
  7. Right, sorry didn't mean to be rude. I think some of the true meaning of what you are asking may have been a little lost in translation.

    In addition to what nonlinear has pointed out I'll try and add some more information at the weekend unless other people contribute between now and then.
  8. Chabah


    If you have 5k BP or so then the best possible investment you can make is about $50. Buy (and read) "Trade Your Way to Financial Freedom" by Van Tharp, Market Wizards and/or The New Market Wizards by Jack Schwager.

    To answer your literal question, $5k or so is the minimum at most places to open an account. Understand that in the USA you will not be able to truly day trade without $25k, because your broker will lock you from making any purchases if you exceed more than 4 day trades in 5 days (I think that's the rule - I might be slightly off). So, you may be waiting around a lot if you make many day trades.

    That's not a problem for swing trades, so your $5k can be pretty active. You really should learn about position sizing, either online or in the first book I mentioned, because that will help guide your trades. Put it this way, in my system I risk about $100 per trade and have almost $40k at work - about .25% of equity at risk on any given trade. If you use a less conservative .5% of equity that still leaves you risking only $25 per trade. You could trade more aggressively but it becomes much more likely that you'll go broke. The absolute highest I would allow (if I were in such a position) would be 1.5% which is still just $75, and the chance you'll go broke would be significant.

    Be careful and good luck,

  9. Dazuni


    thank you chabah, it is nice to have someone willing to share the knowledge.
  10. Dazuni


    is it suppose to be rude?

    that is the reason I query about the entry barrier, is it worth the time and energy because the time it will take to learn and develop the auto run.

    and also I know that I can do multiple small quantities trades, but surely commission become signficant to question if the exercise is worthwhile.

    therefore I tend to think that you would need to have a large enough sum to make auto trading worth the trouble.

    to be honest, personally I see auto trading is to get me large enough sum then I will move the money to other investment, like land and properties.
    #10     May 4, 2007