I think he has two choices other than prop trading with the 2,000 bucks. 1. 4% a day in stocks while he has a full time job, and 2. Three times the H-L on commodities when he has an account of 5,000 minimum and he limits his trading to one contract at the beginning. While he is doing 1. he is learning; at some point he has done some learning and has 5,000 available. Then 2. could kick in. You feel he is on the right track in the prop shop where 40K makes him so much a day. I do not know how much that is for him or anyone else who is doing it. I do read what people say, though. What I read is that 40,000 dollars is quite small and for the time spent their is not much of a reward. My view of this situation is that it is a deadend even giving high value to his OJT. He doesn't want to deal with my comments for several reasons he has. That is cool with me and it does not matter what my view is. It seemed to me, for a moment, that Tyler was at a point in his life where he still has a lot of options. Somehow, options go away for people as they do what they do, in my opinion.
I thought about your comments. As a consequence, I am going to build a Q and A journal that deals with SCT. So, I will be answering a narrow set of questions posed only by practitioners. This kind of skips over some points you have been making. I will not be posting run on copy. This fact alone will improve things for anyone who is tripping over the miscommunications that have occurred on my behalf. I am not an advanced thinker per se. What I do think about is where the rubber meets the road. My focus is the bridge that is being built, nowadays, for anyone in the current demographic that describes traders. The bridge goes from where they are to where it is possible for anyone to use PVT and SCT effectively and efficiently. The bridge is being built by people out there.
Tyler is not an ass. Tyler is here to learn. Just taking eveyones comments as they are sir. Thank you.
I don't agree First if he doesn't trade prop with $2,000 his maximum buying power will be $4,000 (2:1). This severely limits the quantity and type of stocks he can buy. So your '4% a day on stocks' is highly questionable at best. It is not very easy to make 4% a day trading penny stocks with micro quantities. I'm not even going to touch your " Three times the H-L on commodities when he has an account of 5,000 minimum and he limits his trading to one contract at the beginning" theory for obvious reasons. Please don't put words in my mouth. I never said that I felt he is on the right track in the prop shop where 40K makes him so much a day. The OP says that he has $2,000 and is getting leverage at the rate of 20:1. It is his decision to trade prop since that kind of leverage is only available to prop traders. Tyler can do whatever he wants. I am not here to make any choices for him and to say whether something is feasible or not. Conversely, you seem to have taken it upon yourself to not only make the choices for him but also to impose limitations on those choices and point out available plentiful options which in your words "go away for people as they do what they do." I am finished responding to you as I feel it is an exercise in futility since you seem to revel in dogmatic long winded arguments. So go ahead and keep on posting to your heart's content. I'm done with responding to you. You seem to have a penchant for being dogmatic and getting into long winded arguments. So go ahead and make all your assumptions and choices.
By buying the underlying and selling 2 calls above, I have simply hedged my already profitable trade while allowing for some more room to the upside. I do this once I believe a market has given me a significant amount of profit on my underlying and I would like to continue to stay in the trade. I could also buy a put , but I prefer selling calls and letting them dry up. I also have a point then where I would get out and let the calls stay in place. It's all directional analysis. I don't sell calls at the bottom. As far as exposure, the most exposure that I would have would be on the one naked call which when it goes in the money, I have still quite a bit a profit already to protect it. The exposure is limited to just the one naked contract and it could be argued that while it's still out of the money etc, it is much less than one contract. This kind of spread takes a lot less margin than having one outright contract long. There are also numerous times where I have ridden the market up and I buy1 call and sell 2 calls (Buy1 Sell2)for a net credit and I totally get out of the underlying. This is even more safe and let's me continue to participate in a slowing up trend. In addition, if I am 1 to 1 (1 contract for every 125,000 in the Euro FX) and I sell calls against my long, my contention is that I am actually now less than 1 to 1.
where are you getting 20:1? Better not overextend yourself? you could easily lose that amount in a few minutes if your not careful..
If you have $2000, you are trading a $2000 account from a risk perspective, not a $40,000 account, regardless of what a prop shop will provide you. And previous posters are right, the far more important question is: "What can I lose on this trade?" One thing that is often forgotten or seemingly not well understood by new traders is that you are ultimately trading and liable for the risk taken on the value of your positions, NOT on the value of your account. The leverage you are able to get is really immaterial, as the total value of the underlying is your exposure, and is what moves either for or against you. In my experience, both on and off the floor, the people I know who have been doing this for more than 10 years sucessfully are well capitalized, and started very slowly. If you are still trading 5 years from now, whatever the size of your account, you will most likely have learned to trade, and will be ramping up capital, leverage, and hopefully income. Keep in mind that it takes 5 years minimum to learn to be a good carpenter or plumber; is it realistic to expect trading to be so much easier? Just a thought...
If you do not get it the first time, read it again... and again, and again... there are riches for the taking.