I think the real question was: what about trendless periods? The market does not trend strongly the majority of the time. Take some daily or weekly data and analyze the last 30 years before you mortgage your house and bet the money on a 50/75 MA crossover. If you are validating your idea by only looking at the data since 2002, it is insufficient and you will not be prepared to face all market environments. Also, what you are talking about sounds a bit more like long-term trading, borderline with investing. You may be able to pool your money with some other people and share the risks instead of borrowing and taking all of the risks. Of course you won't make as much money if your approach works but you also won't lose as much if it fails. Good luck!
i was searching around for the ruling on refinancing or borrowing money to invest in the market as it was mentioned that it was illegal. seems like you can. on the NASD site they state that people are doing this. http://www.nasd.com/web/idcplg?IdcService=SS_GET_PAGE&ssDocName=NASDW_005961
I think it is rather silly to barrow funds to trade equities, but I am not sure that it is illegal. All kinds of financial planners in 1999 and early 2000 were telling clients to get a home equity loan and put it into the stock market. Brandon
i agree. If im not mistaken, isnt one of the golden rules of trading/investing is to risk capital you can AFFORD to lose?
getting a loan for say 1% on 50,000 to trade with sounds like a good idea to me if your one of those profitable traders. rich folks are nice to have as friends.
If you have a 50K Cash account, you can easily run that up for the 200K you need, when you are good enough. Guess what tells you when you are good enough....you have the profit to show it. Its the clearest and most direct way to becoming a true professional. Everyone is different, but my general advice to trader like you (most traders) is to build up your own nut, that way you have no problem trading well once you have the amount you say you need. The only other alternative is to take your 50K, get a series 7 (took me 1 month to study, a 3 day course, and a day to take the test) and get some leverage so that you can apply your edges whenever they come up (the real reason for getting more capital or leverage, not so you can just blindly increase your position size). I hope this sums it up: patience. I highly recommend against any kind of "loan" for you to increase your trading. You have enought capital now to get low cost tading anywhere, so use your trading skill to bump up your equity. My sense is that if you are thinking 'loan' you are taking a shortcut that could potentially hurt your long term financial outlook (if you lose) or at best may rob you of the awesome power you get whan you take, say $10k, bump it up to $100K, and then really have a professional business. Or in your case 50K, you should be able to take that to $250k no problem.
Okay, take 2 months get your series 7. Take 10K of your 50K ameritrade account, run your system with the 10K. Run it up. If it fails, you can load another 10k after your fix your system or yourself. Second, take the extra 40K and make sure you have the proper money pyramid in place : have a 6 month emergency fund for living expernses (at least started), pay off your smallest debts first, and dump the rest (if there is any left over) into a money market fund so you have some liquidity. If you have 50k in an ameritrade account, and you don't have the above set up, you trade from a weak financial position. If you can get that set-up, using less of your capital, then you trade from a better position and will do much better. So in a sense here, maybe getting your Series 7 can give you 40K more liquidity, and you can really set yourself up to trade well, from the bottom up.
Never never ever trade with borrowed money. Remember the first episode of Tilt? Where that cop wanted to play in the high stakes game and the casino dude said it will cost you a Cadillac to learn at that table? Well the same thing applies to trading. You really have to consider that you may clear out your account more than once and if you are lucky you'll only lose $30 to $50K (expenses + trading losses). Why climb out on a branch, saw it off and lose your house in the process? The more money you have, the more you will lose. Its hard enough to trade with cash, but trading in the hole makes the psychology factor 10x worse. Fact #1. You don't know anything right now. If you knew something, you'd have money and you wouldn't be on this forum which is populated by conspiracy nuts, losers and wannabees. Fact #2, because of Fact #1 you will lose... you may lose quickly or lose slowly but you will lose everything until you 'get' trading. Fact #3, you may never 'get' trading. (I know... you are smarter than everyone else and YOU aren't going to lose.) No real trader trades on borrowed money. Traders are extremely overcapitalized and seek to undertrade their capital. This may not be the case when the traders started out. But even beginning traders have a decent bankroll and don't start out in debt. Another fact to consider. The bankruptcy law changes in the US will take effect in October. These new changes effectively make Chapter 7 almost impossible for individual consumer debtors. So, you can't speculate on a business with credit cards anymore. (Yes I've read those MSN web stories about people who actually did start a business with credit cards. Those articles were reckless then and just plain stupid now.)
50/75 EMA cross? That does not look good based on some basic tests I ran. Very late getting in and out. A flat market would absolutely beat the crap out of you rather quickly. Trend following only works when there is a trend. You will need a better way to determine the nature of the market and there are certainly better MAs to use.