It seems that part of the answer to this question rest with what and how you plan to trade. I gave my answer based on my experiences at equity prop trading firms. Firms that take licensed traders or get them series 7 and 55 licensed and give them 200k to 300k to trade with. In most of these firms the $5000 is just a way for the firm to protect itself from traders who might be tempted to do something foolish that the risk management team doesn't catch fast enough. Often time these firms will limit how much you can lose in a day, before they shut you down. This is designed to keep you from losing your entire $5000 in a week or so. I have seen traders bring in $3000 and over the course of a year or so develop into really good traders who were very profitable (during this time they built there accounts up and were able to take on a lot larger positions) and I have seen guys bring 100k to the table, so that they could immediately trade large size and they still ended up blowing their accounts out. The important thing (specifically at these equity trading firms) that seemed to determine who was successful and who was not at these firms was how quickly the new traders were able to develop winning strategies and how good they were at limiting their risk and their losses. In saying that $5000 is enough to at least get in the game to be a trader, I was speaking from the fact that most of the prop firms that people speak of on this site require a minimum of $5000 to get started. Firms like Echo trade, Assent, Generic, Barkley...etc..etc. Some of these firms will give more leverage than others off that $5k, but that amount seems to be the standard to at least getting in. When I started prop trading back in 2002 there were firms that allowed people to start with no capital deposit. That situation has changed but many of the firms do not require more than $5k to start nowadays. Often times on places such as monsterboard.com there are ads for people interested in prop trading and the firms offer mentoring and other training opportunites, which could also be of some benefit. Now if you are looking to do things as a retail trader then you will obviously need much more capital, but not have to worry about the licensing requirements. In either scenario your living expenses money would need to be seperate from your trading capital. In the past I have worked night or evening jobs to take care of living expenses. Making a living at trading is of course extremely difficult and most new traders do not ever become consistently very profitable, but there are a lot that do and the only way to determine if you will be one of the successful ones or not is to try it and the prop trading route is just one avenue that you may decide to explore. Where these firms ad value is that they make it possible for people who would not normally be able to raise $25k to $100k to try retail daytrading. People interested in trading can save up a much smaller amount of cash see if they can be successful as a trader and if they fail then move on, without having lost their life savings. With so many fewer opportunites to get hired in as a market maker at brokerage firms, it would seem that for many prop trading deals are their best chance to give trading as a career even an attempt.
$5K can buy you a lot of misery if you can't cover a $25K cash call.... remember... Osama is still out there and if you get stuck with some positions that gap down 30% after a "geopolitcal event", you know the rest............
Yet one more ridiculous and truly irresponsible suggestion. A 3% drawdown on 200K of equity - which is NOTHING, especially for a new trader - and he will be cleaned out. The responses on this thread mark a new low for E.T. And that's saying a lot!
Try one of those Mini Forex accounts since they give you the all free charts, tools, and a smaller size future to cut your teeth on. Personally, I like futures....but the margin can be a killer on larger contracts. www.oanda.com was recommended to me. At IB you can open an account with $2,000....but be careful not to risk so much on each trade otherwise you will blow out too fast. Take it from one who did it with a $150,000 account.......I wish I at first only had 5k to lose! Remember, you need to be willing to lose your entire stake. Only trade money you can afford to lose. This is not an easy way to make money....a lot of people blow out their account a couple of times before they figure it out.
For newbies, any Nasdaq or NYSE stock they trade should be very liquid with at least 2-3 million shares per day traded. And, they shouldn't be holding overnight anyway. And, in the case of an "announcement" during the day, all they need to do is go active and exit their "wrong" positions immediately. Here's a thought: What if Osama is caught ?
I agree, the useless responses on these forums really get tedious. To answer your question Ken, yes $5,000 is enough to get started daytrading. With that amount though, you have absolutely no room for error, and you are pretty limited as far as trading vehicles. So, this is what I would do: Before using any of your $5,000 to actually trade live, you need to allocate a portion of that to education ... learning how to trade. To get set up for training: (Assuming you already have the computer hardware, including at least 2 monitors, so none of your $5K is needed for that). 1. Open an account at Interactive Brokers (IB) with $3K of your $5K; (the balance of $5K or more to add later when you go live). The minimum account balance requirement is $2,000 USD. During your period of training (no live orders), your data cost will be $10.00 per month. http://www.interactivebrokers.com/php/main.php With such a small account, the plan is to trade emini index futures. At IB, to trade 1 futures contract between 9:30 AM and 3:45 PM ET you need: For CME products: http://www.cme.com/edu/getstr/index.html $2,000 for ES (Emini S&P500); 1 pt. range = $50 P/L per contract http://www.cme.com/prd/overview_ES702.html $1,875 for NQ (Emini Nasdaq100); 1 pt. range = $20 P/L per contract http://www.cme.com/prd/overview_NQ705.html $1,750 for ER2 (Emini Russell2000); 1 pt. range = $100 P/L per contract http://www.cme.com/prd/overview_ER713.html For CBOT products: http://www.cbot.com/cbot/pub/page/0,3181,909,00.html $1,350 for YM (Emini DOW); 1 pt. range = $5 P/L per contract http://www.cbot.com/cbot/pub/page/0,3181,1560,00.html 2. Install Interactive Brokers' Trader Work Station (TWS) software. http://www.interactivebrokers.com/cgi-bin/jtwsControl.pl?ib_entity= 3. For data and charting, order eSignal. (eSignal Premier; $131 per month with CME and CBOT exchanges) http://www.esignal.com/esignal/ 4. For simulator and live order entry, download NinjaTrader. It's a free program in simulator mode, and is about as real a simulation as you can get. It interfaces with Interactive Brokers' TWS software, and uses IB's data. Later, when you are ready to trade live, you will use NinjaTrader for that too; (for live trading, the cost is $25.00 per month). http://www.ninjatrader.com/ Now that you are set up with the basics, plan on a 6 month training period during which you will study and train on the simulator, entering no live orders. Consider this a feasibility period for your business venture; at the end of six months you decide whether trading is for you or not. Your 6 month feasibility period will cost around $900. (If you hesitate investing the $900 in a training period, be aware that if you just opened an account and went live without any training, you'd for sure lose $900 or more before you quickly ended the venture in failure.) During the feasibility period, the objectives include learning all you can about trading index futures, becoming proficient with the trading software, developing a trading method/system that will give you an edge, and assessing whether or not trading is suitable for you. What you study and where/how you acquire your training might be the subject of another thread question (there are a million sources and methods). However you proceed, do not trade live until you reach a point in simulation where you are generating consistently profitable results based on a trading plan and strategy that you have defined and written into rules. Now, should you pass the feasibility period, be aware that there is another test when you go live. When you start placing live orders, at that point you will be confronted with real risk and decision-making with real financial consequences. Emotions not present during no-risk simulation will emerge, and may become a factor. Emotions may be particularly strong with a small account where there isn't much room to take a loss, so prepare for this. Even though you pass the feasibility period, your emotions might get the best of you in live trading. So, give yourself a feasibility period to develop skills and prepare yourself for live trading. If it works out, great. If it doesn't work out, then you found out with a minimal investment.
The idea is not ridiculous...as was discussed earlier any unproven trader should not be in a position that large!!! Just because a prop firm gives someone $200k to $300k does not mean that they should use it!!! Trading 200 share positions of say $50 stocks would only use $10k of capital per position and a 3% drop would only lose $300 per position. The whole point is to not do size until the trader is consistently profitable and at least has an opportunity to build the account up. Overnights would obviously need to be avoided. These are just simple risk management issues.
Icantoday, Your best bet is going with Oanda where you can trade as small as 1 $ . Charting is included and costs zip. Try first to make some pips on a regular basis and then start increasing your size. You shouldn't expect to make any substantial money the first six months. Start with observing, observing and observing to get a feel how the market moves. Don't think in terms of dollars but in PIPS.