matthew its my fault for not being able to explain what i mean there is no set definition for anything - margined to the hilt - means different things to different people and you normally can only get the margin from a broker/clearer and each of those will take a different view based on their own experiences, and their experience of the trader and - margined to the hilt - to a single man of 21 with $5,000 to possibly base his whole life on - means something different to someone who is over 50 with $10M and have you ever calculated the chance of you being run over, or making it with Liv Tyler, as compared to the chance of you being in the markets the wrong way as a major move occurs that could take you out 100% this risk is something clearers have to live with everyday, since they are always at risk 100% of the time, and they would have real difficulty getting anything over your account size from you i am agreeing with you that high leverage is dangerous, but so is low leverage and getting ground down over time, high risk has high rewards when persued in a proper manner - and anyway, if traders wanted an easy life and easy money - they would just become brokers!
Well with 15,000 in trading capital, and with the daytrading rules now in place. I would advise like some others focusing all or most (10K) for trading 1 nq contract. When you get a nice trend day in place, you can loosen the purse a little and trade 2 contracts.
saschabr supposing that you had started with a 5K account, and trading 2K leverage, and had worked the account up in a few months to 40K and trading 40 contracts with1K leverage - would it then be right - to be trading 40 contracts with 1K margin? again, I am not advocating high leverage, but learning to close out losing positions is one of the most important aspects of trading, as is holding winning positions, losing a slow grind only makes brokers rich, and they dont even want to be rich, they only want to offer good service!
Matt is right...Until you actually feel the pain of a position go massively against you, the idea of leverage is romantic...The beginning trader is always thinking of upside; the pro is thinking of how best to manage downside... I have no idea how you can think of trading 40 lots with 40k...Almost any given day in the markets, you have event risk...Your losses are not limited to either your physical stop or your mental stop...If you try and get out 40 at a price, maybe at a certain time of day and in a certain type of market, you are not going to get filled... I agree that some of the best traders to ever live actually have a certain "gambler's mentality"...This may sound controversial, but I would say that the ability to leverage and max out winning positions is definitely an instinct, it goes beyond the nuts and bolts of system trading and the average trader's capacity to understand this "art of trading"....I also think the professional trader can always manage to get out of a bad trade with less damage that if he just put a physical stop in the market and let the market run him over... But I also think that the best traders de-leverage relative to what they have...Sure, there are the stories of the guys back in their day who parlayed 1000 into 250k or into millions...Fine, they did it, but alot of them have since that time gone broke several times over...The biggest problem some of these trading legends face is that they bet big, win big and lose big...I guess it all comes down to what one wants to get out of trading...If one wants steady consistent returns with less stress, de-leveraging is the answer...If someone wants to become the next Marty Schwartz or Mark Cook, then perhaps leveraging to the hilt when the opportunity presents itself is the answer... Either way, it is the trader's decision and the trader's fate that is on the line...
one way to manage downside is to make a lot of money when the wind is with you the begining trader naturally looks at the upside as that is why he got into trading - and yes - it takes a bit of time to learn that protecting the downside is a very important factor, that will end up making your bottom line positive, but making sure you get full advantage of your upside positions is also important the point of the 40 contracts question is that if someone got to 40 contracts by trading high leverage - are they then right or wrong to trade high leverage since that is how they got to that level in the first place there are a lot of answers to that question - so there is no right answer - however when you reach a level of contracts through high leverage - where liquidity of the applicable contract could effect your efficient liquidation of the position - it may have merit to revert to the origional start position and build again, banking the retained profits and/or apply the retained profits to a more liquid opportunity high leverage regardless should only be used by an experienced trader, one who has seen markets turn, and only in conjunction with money management strategies it does seem ironic and illogical that some brokers use high leverage and low account sizes as a marketing incentive to attract new and therefore inexperienced customers - and as this is is a relativly new phenomenom - it will be interesting to see how this pans out and one last thought - if you were a trader in Argentina, where would you rather have your hard earned money - sitting in a Argentinian bank or in a US clearer backing high leverage trades- risk analysis and asset diversification needs to cover a lot of parameters - - anyone got any cheap gold?
Here is my story... I want to start trading futures. I have studied the Dow index for a year now, and have developed a swing trading system that is returning approx $2K per month per $5 dow emini contract. System features: 1. Long or short. Doesn't matter, don't try to predict, just react to current price relative to support/resistance levels. 2. Holding overnight, as tries to captures multi-day moves, ie my system has been short the cash index since yesterday at 10230. (profit of 150 pts). Now being a newbie, I want to start out with the $2 emini... I know the liquidity sucks there, but I don't want to over leverage to start with. I have $3K to open an IB account with. With the $5 contract, I have never lost more then $125 on a trade, an am returning on average 80-120 a day (including loss days). Am I kidding myself here, what is the chances I go bust, and more importantly what is the chances I will lose more then my account deposit, I am willing to lose the account deposit, but not the house. thanks.
you may want to start with a more liquid contract such as the S&P its really no use asking others opinions on wether u will succeed or not - because they are not you - and you are not them and unless you have a "black box" system - forget the results of your prior testing if you are the "trader type" - you will learn from your mistakes and make money in the end and forget about making a profit - set a target of a maximum loss for each postion you take - choose the out point before you take the trade - and learning to actually close the position at this point - is one of the most important things to learn its easy to buy, there is always a seller - - first rule is to learn how to sell - at a loss set a maximum loss target per day - and stick to it if you make profits at first - thats just luck - selling a losing position at the minimum loss possible is key to profitable trading go for it!
at 10085, on break of obvious downtrend. I seem to have a handle on the dow, and since I don't daytrade, the liquidity should not be a problem for me.
paper trading is not worth the paper its written on! thats the rule - if you are the exception - why waste time paper trading - get in the ring!