I agree with Mav on most things, but my history has rarely, if ever, shown new traders losing a $100k before getting profitable (maybe a couple of people have had to go through that, but not with our Firm). With good training, access to capital, and a lot (lot) of hard work, I have traders who after a few months and maybe a few grand of losses, have turned out to be pretty good. Very few people would let their losses go that far, IMO. However, Mav is in Chicago, and sees a lot of floor traders, perhaps that's the arena of which he speaks...and he may be right in that regard. Don
Don, I'm not referring to going 100k in the hole, I'm talking about 100k in losses over any given period of time. I know a lot of guys that only lost 5k to 15k and started making money but then right back down and then back up and then back down....etc. The bottom line is, to be a consistently profitable trader that makes more then a teacher with tenure in the suburbs of Chicago, it takes quite a bit of losses. I know a lot of guys don't look at it that way. For example, a guy that has made 300k but then loses 100k, well that's 100k in losses. Don, your traders are all over the map. And it has nothing to do with your so-called training. The very best of the best require a level of focus and discipline that most people quite frankly don't have. Sure, you can have guys grinding away inconsistently at opening orders or pair trading but how much are they really making and how consistent are they really? To make it into the top 1% or 5% for that matter, it takes a lot of mistakes and a lot of bad trades. There is no way around this. There is no magic book, course, indicator, strategy, or even firm (gulp) that has the magic pill. It takes something that most people just don't have. Hey, being a public school teacher ain't all that bad is it?
My wife is a public school teacher, and, yes, it can be "that bad". LOL. Mav and I may have to "agree to disagree" about the training, especially when our Pairs group (over 70 traders), our family portfolio group, our automated openings guys, and those using automated scalper programs are doing well. Traders have to start someplace, and I think just being part of a successful group makes a big difference (psychologically) as well. As always, hard work and discipline count a lot, but you have to know the "what" as in "what to do". Just by having such a diverse group of traders making money helps when sharing strategies with new people. All the best to everyone, Don
Don, I never said your traders are not doing well. I said all traders go through a learning curve. Yes, obviously I believe in the group dynamic or I would not be running an office and teaching my guys to trade. My comment was pertaining to the idea of why traders need capital. Having 5k or 15k is not going to cut it. If any new guy thinks he is not going to go through that money he is living in a fantasy world. I am trying to emphasize the point of leverage is meaningless to a trader who is not profitable. Having leverage is great for consistently profitable traders. For guys that are net negative, all leverage does is leverage your losses.
Leverage is one thing, of course it can be detrimental to someone who simply uses it to trade bigger size. Having capital to use for the opening strategy and multiple pairs and mergers means that traders can actually participate in strategies like this, as opposed to trying to scalp or momentum trade with smaller accounts. It just opens up different doors, strategy wise (IMO). (no real debate here). Don
10K 15K whatever 25K...if your strategy works, and you pay by the share, the only fixed cost is your data feeds. There is a little smoke here. Firms like you to put up the most capital possible beacuse they dont' like monitoring your risk tick by tick. They also know that more buying power means more soft dollars (commissions). Trust me, I have done it that way. And while I have more capital, I don't leave a lot with the firm. Call me crazy. If you are a decdent trader, then you probably should have more than 10K to put up. But if part of your risk strategy with a firm is not to put up a lot of capital, then you can still make money on 10K 15K (even 5K). You should know your max drawdowns and plane your trade size accordingly. So, if you have 5K, you are not gonig to trade 1000 share pairs on each side, because a .06 cent move on each pair loses you $120 dollars and thats more than the risk you might want to take per day. Id say at $5k, you would probably want to risk no more tha $50.00 per day. That's why the firms want more deposit, cause that kind of trading is generally low volume. Since stock trading is SCALABLE (100 shares, 50 shares, etc) you can reduce your trade size to accord with your equity level. Its MUCH harder to do this with commodities. That's why prop firms are in business. If everyone had 1MM to allocate to trading, prop firms would be next on the chopping block. Don't let anyone tell you that you need X amount of dollars to make money, to put it more accurately, THE FIRM needs X amount of dollars to make it worth their time. If you are a beginnger, yes, count on 25K as your education money. THat's a fair argument. 'Firms know that beginners will lose most money not to their commissions but to the market, so even then they don't like it too much. A lower deposit is even worse for them. HInt: it's probably easier to find a few people with 10K each to back you, than to trade with 5K or 10K as a newbie, but still, if you can make money trading 50 shares at a time with 5K, you can do it with 100 shares at 10K, or 200 shares at 20K, etc. One work on getting backed: be honest with people about what you are trying to do. You might be surprised what comes of it if your true intention is to trade. There is some stuff in the regulatory literature about trading less than 100 shares, but that's usually, again, a headache for the firm that they would rather not deal with. It's not illegal. Just talk to pair or merger arb traders, who trade lots of 750 225 75 etc. No firm will turn away their volume on odd lots. Anyway, i ramble. But if your trading is profitable, it IS scalable save the fixed cost of data fees. And at most that would be like $300.00 month if you can't get it covered from small volume. You put that 300.00 in as a cost of doing business, its tax deductible too. In the lowest tax bracket, it's already only $200.00 per month after taxes. Trading is probably the lowest cost business to start and maintain. You can even trade from a storage unit with a huge bank of computers. If you ahve a good strategy and a good firm, and some capital, you can run this business.