You've got some good advice there. I am/was in a similar situation....made alot trading..spent alot on a car and other stuff and then wondered how to trade a large account size. Unfortunately its not a case of just increasing your bet size because liquidity becomes an issue. I play a few strategies - firstly I tend to keep away from day trading - largely due to time and liquidity considerations. I tend to go for swing trades and macro trades. Swing trades I'll risk maybe a 10% move on the trade....but I don't put that much on...I tend to put on between $20k-$80k per stock...if I I'm bullish on a particular sector but liquidity is not good then I'll choose a couple of stocks and spread the risk. If I'm risking 10% then I'm looking for atleast 20% and ideally to catch a big trend. I also do alot of futures- particularly currencies - prefer to take advantage of the futures leverage but I treat them as if they are the full amount...e.g. one cable contract is $100,000 as opposed to one cable contract is only a couple of thousand in margin. I also hedge my dollars by taking currency positions. I also keep aside a pool of what I cool gambling money - this is money that I am willing to lose entirely...usually to buy way OTM options on an punt - ones which will pay 50 or 100-1 - mostly if I'm going for a big breakdown or run-up. The most difficult thing for me is that I usually have a pile of cash doing nothing ...and with todays interest rates its quite painful. I've been doing research on s-term high yield bonds but not quite comfortable with them yet. I also look for companies with strong fundamentals and technicals that have a nice dividend yield ..if I can pick up a stock moving sideways on very strong support (monthly/yearly support) that pays => 5% dividend then that will do nicely as a place to park cash. Key though is to work out your risk tolerance and what you want...e.g if you have $1m then if you make 15% pa thats $150k - for some people that's enough ...if thats enough for you then dont take any more risk...you need to decide if that's enough for you. I do believe that safety of capital is quite important - no need to give your money back to the market. One good thing I like about having alot of trading capital is that I can stick it sideways stocks...e.g. if as stock has been trading sideways for a very long time, I used to wait for the breakout before jumping in....whereas now I will just accumulate it at its support level...and then it doesn't matter if it takes months to break out...particularly if it also pays a dividend. Also expand your horizons....look at global markets...become a cherry picker....in the last few years I've invested in stock/currenices/futures from Philippines, UK, US, Europe, Australia, New Zealand, China, Hong Kong, Canada....and probably a few others I can't remember.
Interesting topic. Many of the comments are along the lines of expand into other investments. I am skeptical of that. It's hard enough to be successful in something you know. There is a balance here that only you can make. On the one side is the timetested adage that you only need to get rich once. Read the Market Wizards books and appreciate that anyone can blow up at any time. Stuff happens. So I'd want to set aside enough that I was covered no mattter what. The other side of the ledger is that you can really make some absolute returns with 500k if your strategy will support it. But are you comfortable with that level of risk? If not you will somehow saboutage yourself. Perhaps one approach would be to trade your normal size, but increase it when you identify significant opportunity,as in a potential turning point in the market.
I too have a similar problem. You see, I have a trading account that I have grown to about $35,000,000 over the past several months. My problem is that I sometimes feel as though I'm only trading w/ an acount half that size!! (can you believe it??). My main problem is that I tend to make more than my target on each trade. This is KILLING me on taxes. It seems that just as my income is starting to come down to reasonable levels -- I'll make another HUGE score! I've considered blowing a good portion of my account on hookers and booze, but wanted to check with you guys first. Thanks. Just a young whipper-snapper looking for some good advice from trusted friends, the Dog
Stick with the booze...hookers get to expensive and carry too many diseases....at least with booze you can always go to AA to clear up any problems.....try doing that with the CLAP
And here again is the proof that account size growth produces challenging psychological problems for some people ...... not only for the trader, but those around him. GreenDog - where exactly in Harry's original post did you pick up any hint of bragging, arrogance or posturing ? I'd love to know - because I sure as hell can't see it.
In certain stocks or commodities I may have a sweet spot position size and timeline based upon my risk parameters. As my risk capital increased I found other trades that made sense. Also I have diversified into more than one account with each designated for a particular class of trades. I try to keep the risk within my tolerances provided that I find trades that match my risk model: the absolute dollar value of any individual deal doesn't matter - just my analysis of the risk. If you are underutilizing your trading risk capital it may be a sign that you are reaching the limit of your personal capacity: You may need to hire additional traders or craft more automated systems, or both.
you have to admit, letting the entire country and possibly IRS agents, criminals and the like know you are sitting on 500k is kind of silly? I mean, he could have just asked where you put large profits....But i still say he should just buy a decent valued house and live long and prosper.
Huhhh??? I present my situation and ask a reasonable question and this is what I get? This hurts The only reasonable answer I get is from TM Trader. Thanks TM, I'll try to steer clear of the hookers. (Surely I'm not the only one who thinks this is a silly thread)
I have recently dropped my size. Risk parameters were within my system and plan, but I just could not handle the big wrong days anymore. I am now faced with having to deal with not making what my system and plan calls for. Maybe I am having confidence issues? I don't know. My biggest fear is that I am sensing a change in the current market, and I am not sure how to adjust to it (spooked I guess). (Trading seems more lethargic and channeled in a narrow range [trends and chop])
GreenDog doesn't post too much, but when he/she does, it is usually pretty good. In this case I thought it was pretty damn funny. My initial thought on the whole thread is that anyone who traded an account up to 500k should be GIVING advice and not asking for it. So maybe the whole question is a spoof. Or maybe not. But the answers to the question do address some very specific problems that traders have to deal with when it comes to allocating capital.