Very elementary, dumb question

Discussion in 'Professional Trading' started by pbw, Apr 6, 2006.

  1. pbw


    I've only been position trading for about four months -- so please bear with this elementary question...

    If you have an account size of say 5k -7k which I suspect most beginning (wannabe) traders do --

    how is it possible to play the market?

    You need at least 30k minimum --and who has that?

    With a small account size -- you are pretty well forced into playing the low cost --penny stocks which are more risky.

    Eg. If you buy a stock for $10 -- you can only buy a very limited amount -- to put all your savings on it would be too risky -- also the $10 stock would have to appreciate substantially to make any reasonble return on it.

    Hence the only solution is buy on margin or use options to get greater leverage. But for beginning traders you need to be experienced to do that.

    So what is the solution here?

    What would you reconmend a beginning trader with a account size of 5k-7k to do?

    Comments appreciated....

    Off topic comments not appreciated....
  2. You need to use margin if you wanted to have more BP. There's no way around it unless you trade penny stocks. If you decided to daytrade, then I would suggest you use margin.
  3. Hello

    Here are a couple of suggestions (activities) for wannabe traders who are undercapitalized;

    1. Wait
    2. Study
    3. Use a simulator
    4. Observe
    5. Research
    6. Backtest
    7. Save

    Good luck
  4. 5k to 7k? Futures, Forex...(I am not saying try these)

    You can "play" the market with 5k no problem. It will not be enough to live on of course, but if your strategy is correct, you will make money.

    DEMO trade with the amount you plan to invest. Risk/Money management is key.

  5. jerryz


    are you talking about trading with 5-7k without having another job? if this is the case, find another job first. you cannot live off of the trading income from 5-7k. anyone who tells you otherwise is either a complete idiot or doesn't give a crap about you.
  6. (1) Get as much money as you can into your account.

    (2) DO NOT trade "penny stocks" or "high tech" flyers. This is gambling... not trading.

    (3) Focus on ** low volatility ** securities like many of the 500 of closed-end funds on the NYSE.

    (4) Specialize in a niche that interests you and gradually become an expert... like real estate funds, for example.

    (4) Leverage all your trading using 50% margin... so you are now around 15K.
    But your risk is very limited because you are not trading crazy sh*t.

    (5) Flat rate trading around $0.005/share with IB...
    Allows you to trade 300-400 shares just as profitably in relative terms as 10x that amount.

    (6) Try to be 50% long and 50% short at all times.

    (7) Trade actively. Maybe 5 trades/day. You can make a profit on a $0.05 flip. The idea is to get experience = many 1000s of trades.

    (8) Focus on your mistakes and learn from them.

    Go for it.


    :cool: :cool: :cool:
  7. pbw


    But using margin for a beginner can be a quick route to neverland. You can be out of the game a lot sooner than is expected and you can leave the game with a big debt.

    Beginners should not use margin until they have a good level of experinece would you not agree.

    Are low cost stocks the only alternative?

    There must be a number of experienced traders on ET who started with small accounts.

    How did you survive the beginning-- share the knowledge if you may...
  8. Trading bubble?
  9. What I am going to say here is something that I mean very seriously. -- You need to build the grubstake with deep out of the money naked premium on futures options. If you don't know what I mean, you need to stop trading now until you do. You will need to be very patient and let the premium run out. In the meantime, you need to contribute to the account as much as possible. This is by far the best course of action for you right now. Forget stock picking.
  10. pbw


    How about this -- forget about what I should do..

    (you end up getting contradictory confusing answers)

    Question is what did "you" do?

    Most of you started with small accounts -- How did you survive the begiining?

    No fluff, precise answers would only be helpful to get a better understanding..
    #10     Apr 6, 2006