Trading large capital$

Discussion in 'Strategy Development' started by dividend, Apr 2, 2006.

  1. Hello. Would someone inform me as to how large traders take positions with large amounts of capital?

    I was thinking of how "large traders" that earn $10M or so daytrade stocks... I think they would have to either average up/down or do a basket-style system on correlated stocks... but it would be hard to do that because most stocks don't have that kind of liquidity most of the time...

    A trader that earns $10MM would have to do about $50,000 a day... That is 5 points for 10,000 shares, or 2 points for 25,000 shares... Not only is it hard to grab those shares but it is just as difficult to close the position as well.... On top of TA, tape reading ,etc... I think execution skill is important as well...

    If anyone has any insights on day trading this way or other info I'd appreciate it. Thanks.
  3. so its not possible?

    it was just a question. no need to get your panties in a bunch :)

    if you want to say $1 M then it will have to be $5,000 / day...
    again, a liquidity issue there.

    anyway, i dont think there will be many responses to this but i figured id ask anyway since it was on my mind.

    btw, when i first started being exposed to trading, an auditor at the sec told me that 'you wouldnt believe how much these traders make' ... 'they make in a month what an average person makes in a year' ... i honestly was kind of mad at him at the time because i thought he was lying. anyway, that was a while ago.
  4. romik


    MSFT, average daily volume 65m, why would there be a problem to get filled on 25000 shares? IMO your answer lies in trading liquid stocks/futures where 25k shares is not classed as a large order

    On the other hand, in futures, say e-mini S&P500, on 200 lot trade with an average gain of 1 point x 5 trades equals $50k. And from what I understand, getting filled is not an issue, providing you buy/sell at Market.
  5. I agree with romik. However....if I were still trading stocks....I would spread out my or sell....over several high daily volume companies (the Basket). Find stocks that are not usually in a tight a GOOG.

    In futures....I think it would be much easier to do. I would not go in with a 200 lot trade on ES though....divided into smaller lots....on entry. If we are talking the e-mini's only....maybe here some ES....ER....YM....EuroFX....Bonds....etc.

    I "Think" you do the $50k per day....with 10M....but I am "Sure" you could do the 5k per day....with 1M (and much less)....which I think would be very easy. Then again....if you don't know what you are could lose that much or more....and probably much faster....haha

    You mentioned "average up/down". If you mean "averaging into a a Losing trade"....I think that is a recipe for disaster. If you mean "Scale In" on a Winning trade....sure.

    Tape reading....execution skill are very important. If a trader can't read the tape....better forget it.

    A very true story:

    Back in 2000....when the market peaked....many traders and investors lost big time. Why?....because many Investors are "buy and hold" if they didn't get out....they lost. Day traders lost....because they thought it would turn and go back up. What is funny....well maybe not traders who "thought" they were day traders because they made a lot of money....when the market was going up....lost....when it went down. Why?....because many of them didn't have the foggiest idea of how to Short a stock. They only knew how to Buy and Sell. I personally know many day traders like this....or used to be day traders.

    Well....I had a "rich" lady friend in California....who lost close to 1.5 million dollars in about 5 to 6 months. She lived in a very fancy home. She still had plenty of money....but as far as trading went....she was like a deer in headlights....totally frozen. I ended up going to California to help her. She still had "many" stocks that had a lot of profit. We liquidated "all" the major losers....and many of the profitable stocks....which had lost quite a bit of their profit.

    She had no concept of "Shorting". She only knew Buy and Sell. Over several months....we started rebuilding. We were averaging about $4,500 per day in net profits. But there was one problem (of many)....she wanted to make up for all her losses....much faster than what we were doing. I told her she would eventually get there....but that wasn't good enough. I was flying back and forth between Seattle and Californina. I finally had to tell her I couldn't come back anymore. It was a sad situation. On one hand....I felt like I was letting down a friend....but on the other hand....I had my own life to live. day....a cabinet door was open in her kitchen....and when I went to get some water....I noticed at least a couple of rows of medicine bottles. She was on so much blew me away. No way should she be day trading. I knew she had problems....but didn't realize the extent of the problems.

    It doesn't matter how much money a trader has to trade is easy to lose it all.

  6. I also think he was lying by not telling a complete truth. :D

    PS: A very good thread indeed.
  7. There are limitations on all kinds of trading.

    AS you review the possibilities and look at how people use their time to manage their money, you will begin to consider the options (choices worth following up upon) that are really available.

    So far no one has been very helpful to you since it is unfamiliar territory for them and they are just being superficial.

    The relationship of amount of capital and how much can be made in various types of trading is roughly an inverse relationship.

    Most people that I know in vest in stock type instruments until they learn what the potential of differing markets hold for them.

    When they discover full time investing and trading, they turn to using their capital in several ways concurrently.

    So it turns out making large amounts of money is not done in day trading situations. And on the other hand onlt a small amout of capital deplowed in day trading usually makes many time (as a %) the amount of money made other wise.

    So a person has a high/low range of capital devoted to day trading and doing quick trades. An optimum for this is using capital at the largest amount for non- partial fills and ding about 20 to 40 actions a day. This nets 3x the H/L range of any given day.

    You can see that much capital is generated and it is siphoned off periodically and deployed in applications that take advantage of the dialy potential of stock instuments. the better one lie in a 3 beta range where earnings of 4 to 7% a day is the norm.

    There are limitations here that are noticable. Partial fills are the rule and the upper limit for postions runs aroung 10% of the peaking volume per day. Cycles are traded in a position frequency of 4 to 8 days to make the above % per day.

    You can think in terms of 500K per trade per stream of capital as a norm. As time passes the number of streams does become relatively large. Normally a person can run 4 to 6 then they double down and then they get to levels around somewhat under 20.

    What I have described exceeds your query but it is not day trading exclusively.

    As this type of situation develops for a person, the person usually has other objectives that he deals with that keep the size of accounts within reason for an individual.

    If you look at the performance of professionals you see that they do not do very well relatively speaking. That kind of system and performance is based upon what their clients will stand for in the context that the clients, personally, have no alternatives. Id a person is trying to keep clients and obtain new ones, then that person doesn't have much time to be making a lot of money for his clients.

    Why people o not make the money the market offers as demonstrated by the data of this potential. Lays primarily with the person's inability to recognize how to learn about how markets work and offer their potential. It turns out to be a mental process. You can see by your question that you have little idea of how to go about learning.

    What I have noted for you above is simply a consequence of learning to make money. I believe that you, roughly speaking, will find it to be unbelievable.
  8. Thanks for the response(s) guys... Seems like sometimes things get kind of anxious when big numbers are thrown around, but I was just curious about the limitations of daytrading, so I used $10 mil as an example...

    I think its important to understand the limitations of a market... traders earning $10 mil with trading futures contracts are known but i have not seen much is publicized on people who do this with stocks...

    If anyone has actual experience trading a lot of capital I'd love to hear about it.... I have only very limited experience watching anyone else trade, and most "customers" at props aren't very experienced, so I dont know what its like at a professional desk.
  9. Why should we limit the scope of a good topic like this thread to only covering stocks and daytrading?

    Perhaps we could learn something from all traders of all styles/ markets as long as they trade with large capital.

    Are there other useful books/ resources/ links like this one below?

    Devising A Medium-Term Forex Trading System
  10. romik


    It is possible to build your trading capital DAY TRADING starting with, I would say, initial trading capital of $30k. And for a good trader it is not a big deal, like Grob and OddTrader have said, at some point, you will have to start spreading your capital into other markets and there are lots of other financial instruments to do so. Day trading, especially in futures, due to high leverage, does allow for large yields to be generated, IF YOU KEEP BOTH FEET ON THE GROUND and of course know the instrument you are trading.

    Both my cousins have started out that way, trading futures. in almost 8 years time since the start, they have gone from high risk trading only to high/med/low by dedicating gains into various other types of investments - residential property, luxury property, opened an investment bank, commercial loans, capital management, co-own a silver mine, day trading, investing, bonds, etc. In the end of the day, one will have to realise, that "fortunes" can be made in day trading, but to sustain that level of success becomes more and more difficult when trading capital is compounded into 1 type of trading activity.
    #10     Apr 3, 2006