How much capital, in percentage (on average), should one expect to lose in order to hang in there and improve their trading? I'm a newbie to this business and am currently down. I know that it is very easy to lose lots of money in the beginning, but its positive if you get a grip on how the markets work - and learn from those mistakes. So how much money and time should one devote (or expect to devote) in order to improve their trading profitability and winning consistency? Thanx for your input.
If you mean how much money to lose while trading? I'd say as little as possible. Be sure you papertrade and backtest enough before you give your money to the markets. Than trade small small small. Then add a little. then a little. While learning: You can probably borrow most of the books you could read from your library, or have the library order the books from other libraries that have them. You could also buy books etc and sell them later. Thus not spending too much money that can be used for trading later on.
In other words: Time? As much as you got! your competing against people/companies who do this for a living 24 hours a day. Is your couple of hours a week enough to compete? Money? As little as possible! Why lose money at all? I guess it's somewhat inevitable, but still. Make sure you know your things before you "try something out". Regards
Subscription to IBD daily, books, and lots of time 6:00AM to 10:00PM Mon-Fri Sat Sun usually 4-6 hours minus interuptions. Time and discipline trump capital starting costs. Akuma
My point is, a mistake in trading means losing money. you can only learn if you make mistakes, and in the case of trading you are BOUND to make some mistakes due to uncertainty. How much capital does the average joe shell out to the markets before he starts to gather enough skills (from learning from the mistakes he made previously) to become successful in this field?
300k minimum.................. Cash, books, time, rolaids Maalox, heartaches, etc. Then it all gels and like you suspected all along, the road traveled was not only hard but rewarding.
Your losses might not be a mistake. Your losses might actually mean you are trading correctly. Your backtesting can show you if you are trading with sound trading rules. Losing can be the way to win. For example, if I consider playing a coin toss game where I bet 1 dollar, if I lose then I lose the dollar, but if I win then I get 10 dollars, then my choice is to play. I expect to lose half the time. I expect losing streaks. I also expect to win a lot of money sometimes. I can not predict the future. I do not know how great my losses will be next year. It is not a mistake to trade and lose. Losing is not the same as making a mistake. I find back testing helps put winning streaks and losing streaks in perspective. I recall selling Amgen stock short about September 1990 because it had no earnings and I interpeted general stock price action to be a bear market at the time. I remember Amgen stock price rising about 50 points, splitting and rising more. I remember the margin call. I closed the short sale with about a 67 % equity draw down. Not having a tested method, or a stop loss plan, or a position sizing test study are examples of my mistakes.
Don't lose money to learn. But lose money to earn money - there are inevitable losses for every winning. You know the cut your losses short, let your profits run thing... You don't have to lose to learn. If you have a good strategy you don't have to lose to learn. Develop your strategy with paper trading and backtesting. When you have a good sound strategy your losses are not losses, that are needed to learn, they are losses that are part of the game. Maybe 50% of your trades are profitable, the rest are losses - not ones that you need to learn but ones that you counted with starting trading your strategy. Hope I make sense!
OK, let's disagree here. First, you don't need a daily publication to become a successful trader. You can find everything on the net for free. Second, you might don't even need books either, or you can have them from your library. If you read 3-5 books, that is sufficient, the rest is just repetition. The biggest thing I disagree with is time. You don't need to put in countless hours, that is a myth. What you need is an excellent ability to observe. The market ALWAYS repeats itself. Find repeating patterns and take advantage of it.