I understand your points, but if the person is trying to get into futures because he doesnt have the required $25k minimum for stocks, he really should be willing to trade the neccessary contracts based on r/r. For example, if he has a great r/r and puts on 5 or 6 contracts, he will loose $60 per tick (on the es). Plus, if he/she is not seasoned, emotions will take a toll, and his account will drain very quickly. With the stocks, you can control the losses and make them much more manageable. have a great July 4th!!!
Why couldn't he control losses with futures? Day trading futures is the same as day trading stocks, with futures having a lower account balance requirement. Strip off the labels ES, BAC, GOOG We are all trading in price changes, whatever the product.
Under-capitalization is as as much a factor in losing, as is lack of skill and lack of high technology technical analysis. I try and explain that your style of trading is hugely affected by your account size. But so many argue with me that it has nothing to do with account size, either you can trade or you can't trade. That is so off the mark. Account size affects every aspect of trading. Even assuming you have a high win-rate, you may still be unable to pull the trigger because your are so undercapitalized that a single "anomaly" might kick you out. Precision can help a lot, but the psychology of risk aversion often dooms traders. Either they can't pull the trigger or, worse... They set close stops because they're scared of losing and, as a result of the stops, they lose because even modest risks are too much for them to tolerate psychologically. With the right technology, you can boost the odds well in your favor, but fundamentally it is always possible something can go wrong. That is something the under-capitalized trader can't tolerate. That's been the biggest factor in my own clients' inability to thrive at trading, because so many try and trade on such slim account sizes. Some risk is just inevitable in all trading, no matter how you shave down the risk, it's still there.
So what do you think is a fair amount of capitlization for a futures account? I agree about the underappreciation for the psycological aspects a low account has on a trader. I'm not out but I feel that I basically can't do anything. Until your trying to set your stops with a low account can you truly understand how challenging tthe task of trading is when you have a low account.
Most people don't even know about CFDs here. But I agree, you can open an account with $100 and trade the ES. Sure you are not going to make money, but you won't lose much either and you still trading real money in real time and getting use to a platform. If you can not make money making small steps, there is no point in trying to do it in big steps/account...
Well, this is a very thoughtful comment on a topic which is very much misunderstood generally in the trading community. That trading style is practically dominated by account size, especially when the trader has taken some hits and feels about to lose everything s/he has been working toward. Strength may yield further strength, but what is more certain is that weakness and failure are very much debilitating. Along with many traders, I've been in that situation where almost no risk can be taken and the general confidence and psychological situation deteriorates to the point where the best action is no action. There seems to be no way to gain traction in the market, and one is facing the prospect of having to stick with the "day job" and maybe even give up trading for a living. The best and brightest and boldest can easily get into such a situation. As you can see, this could be discussed endlessly but there is NO single answer to the question how much capitalization is needed. If you think about it, it's clearly a function of trading style, personal style, market (restricting my comments to futures) and the level of technical analysis and anticipated win rates you can realistically expect. One way to try and get over "finger freeze" (being unable to press the button) is maybe to lower the risk on each transaction, which becomes more of a scalping style. But, without a high level of confidence that you'll achieve a win on any given market entry, and without some sort of automatic support for high probability entry, emotions again become debilitating and the downward spiral isn't easily overcome especially when funding is precariously low and risk tolerance is therefore near zero.
I think lowering the risk creates more commisions for the broker. It all becomes a function of how accurate are your signals, how little will you accept for profit and than inch your way back up the ladder. In the futures market your signals play tricks on you frequently. Unless I have rationanized my inept system, which I am forced to admit due to the balance in my account. When the account was full and moving along getting hit the same way it is now but i had more resilency to hold consequently more winners i would have said my system was good, not great but good. Now I believe the same system is totally inept. So I 'm being forced to re-evaluate reluctantly but if i just had more money it would be good! hahah. Ah shit Im such a loser!
Well, sometimes a system works and then falls apart. You hear that all the time. But a system which uses more fundamental short term technicals tends to be more resilient. Sometimes, it's a matter of knowing what your market tends to do. Does it exploit breakdowns and breakouts? Well, then expect that... Never easy.