I'm trying to grasp a figure here or balance risk and reward. I don't know if I should put 20 or 30%, what do you guys think? What other income sources do you guys have, and how much % is put into that asset class? Would be awesome to know, cheers.
My trading account has a minimum of $30,000 at any point and when if hits roughly$100,000 I roll off some cash to either put into longer term holdings or pay bills(college tuitions of late). If I have gotten in a equity position that I held for a swing trade it may run higher as I like to stay in cash and avoid margin beyond the day trade as much as possible. I draw usually once a month from it. In terms of other income we have dividend income which covers a bit more than 15% of the budget. Also have a small pension check from some work I did long ago, and covers maybe 10% of budget.
Well, you're talking about 2 different things -- income and net worth. On the income side, Tony Robbins took a concept from Sir John Templeton about using "buckets" for a portion of your income. Robbins recommends (as many others), that first you allocate 10% to charity. The next 10% then divide it into 3 buckets with different risks / goals. So for me, 1/3 goes into savings; 1/3 into investment (more long-term) and then 1/3 into trading / speculation. Then you live off the remaining 80%. If you want to take it a step further, you can also periodically allocate a portion of any speculation / trading gains to the other buckets. On the net worth side, that depends on a lot of factors so I'm not even going to go there other than to suggest that you have a sufficient amount in savings. Hope that helps or gives you some ideas.
It isn't your trading "account" that needs to be limited/protected, but rather your trading "capital". When you take a risk, think of it not as a percentage of your "trading account", but rather of all the money you have committed to trying to grow in the markets... aka "trading capital". Personally, I have 100% of my "net worth excluding home" committed to growth in the markets (which I ALWAYS trade with tight stops, naturally). I don't have 100% "in my trading account", but all of my money is "backing any play I make". The amount actually "in" my trading account is completely irrelevant. Part of being a successful investor is operating within your "comfort zone"... each to his own.
I didn't actually answer your question originally, so now I'd say my capital specifically for trading is under 5% of net worth. When I first started it was the internet bubble and I was easily using 100% of net worth. I was a bigger idiot than now, although maybe by not much.
75% of my liquid net worth is my trading accounts being traded daily. Probably too high a percentage given I have a wife and kids. A blowup would be devastating. I will likely transition in the next year to 50% of LNW in trading and the other 50% in interest bearing instruments.
i am setting here thinking mine goes the other way - what % of income comes out of my trading account.