How Much Money Does a Trader Need To Start Trading?

This is a discussion on How Much Money Does a Trader Need To Start Trading? within the New to Trade2Win forums, part of the Reception category; Originally Posted by Bund Gekko As for how much you need to do this for a living ! Im thinking ...

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Old Nov 2, 2010, 4:46pm   #16
 
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re: How Much Money Does a Trader Need To Start Trading?

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Originally Posted by Bund Gekko View Post
As for how much you need to do this for a living ! Im thinking about 25k to start , if your looking for additional income £500 on a spread betting account should do it !
Some of my students have started with the minimum required to trade options with the broker I recommend. That used to be $3,500.
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Old Nov 9, 2010, 9:11am   #17
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Re: How Much Money Does a Trader Need to Start Trading?

I aim to make 20-30% a year, whilst aiming to keep drawdown below 20%. I could of course shoot for a much higher profit "target", but I'm doubtful of my ability to handle the increased drawdown that this would entail.

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Old Nov 15, 2010, 6:56pm   #18
 
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re: How Much Money Does a Trader Need To Start Trading?

I started at a prop company that allowed me for 1 to 60 and then 1 to 100 leverage, the minimum was $2000.00 day trading equities. i have not 9 thousand with them and i just put a side a year of my mortgage with the rest.

Trading US equities.

Trading i think is the only profession where you can make this kind a moves, the overhead is practicable $0 and is all about you, not have to deal with employees or litigations or advertisement.

It is possible!, what i did not mention above is that i spend the first month watching at the real time data...... not a single trade in the first month. The prop allow me that crazy leverage which also was the reason of my success. I need to thank ritzy capital. But guys if this is what you love, you may suffer at the beginning but it is worth it!!!!

The freedom that i gave to my family is amazing!! and not better time now, that i have a new born on the way. 2010 ROCKS!!!!
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Old Dec 12, 2010, 2:48pm   #19
 
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re: How Much Money Does a Trader Need To Start Trading?

I still did not see a clear answer to the question in this topic "How much money do you need to start daytading" And by starting daytrading I mean quitting your job & live off daytrading alone as your sole income.

By this standard, I would think I would need about 300.000 Euro to do it. Making a 10% net annual return would result in 30.000 Euro which is about my net annual income from my current employer, including pension, holiday pay, profit sharing benefits and tax returns.

What do you guys think? Is this a realistic figure? Looking forward to reactions from people who are actually trading for a living themselves.
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Old Dec 12, 2010, 8:50pm   #20
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re: How Much Money Does a Trader Need To Start Trading?

Here's a question, say you have a very small account and double it in several months, then double it again in several month, then again...you see where I'm going with this obviously...

If you can double 1000 why cant you double 100K? Is it psychology? Does the greater amount of money cause fear/greed to make you stray from your rules? If you have a winning edge shouldn't that pay out no matter how much you trade with? And if it is strictly a function of psychology wouldnt it be worth it to invest some of the earning from the system into some form or high level coaching or education?
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Old Dec 13, 2010, 9:37am   #21
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re: How Much Money Does a Trader Need To Start Trading?

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Originally Posted by Willem30m View Post
I still did not see a clear answer to the question in this topic "How much money do you need to start daytading" And by starting daytrading I mean quitting your job & live off daytrading alone as your sole income.

By this standard, I would think I would need about 300.000 Euro to do it. Making a 10% net annual return would result in 30.000 Euro which is about my net annual income from my current employer, including pension, holiday pay, profit sharing benefits and tax returns.

What do you guys think? Is this a realistic figure? Looking forward to reactions from people who are actually trading for a living themselves.
Hi Willem,
Welcome to T2W.
Please see post #2 the 'Long Answer' - as it specifically answers this very question in considerable detail. In a nutshell, IF your trading results show a return of 10% - and you require Euros 30k p/a to live off - then you're correct in thinking you'll need an account funded to the tune of Euros 300k.
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Old Dec 16, 2010, 1:00pm   #22
 
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re: How Much Money Does a Trader Need To Start Trading?

My point:

Nobody will tell how much you can use in trading except yourself. Be fearless and face your as a trader biggest nightmare - YOU LOSE ALL! So what you will do what will feel, what you will tell your friend and wife! With what amount you will be able to say : Not a big deal! That is your amount you can start trading. It is different for everyone and not always depend from your bank account statements.

Emilio
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Old Dec 20, 2010, 3:09am   #23
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re: How Much Money Does a Trader Need To Start Trading?

the advices are very important but i think trade is not a easy job on the contrary it is really very hard so before you start you must do many preparation in advance such as Preparing long-term work .it is not only physically but mentally
hope everyone can do it well
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Old Dec 22, 2010, 3:25pm   #24
 
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Re: How Much Money Does a Trader Need to Start Trading?

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Originally Posted by meanreversion View Post
I aim to make 20-30% a year, whilst aiming to keep drawdown below 20%. I could of course shoot for a much higher profit "target", but I'm doubtful of my ability to handle the increased drawdown that this would entail.
This is right point! trader can handle any profit, drawdown is the limit for trader!
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Old Dec 22, 2010, 3:57pm   #25
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re: How Much Money Does a Trader Need To Start Trading?

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Originally Posted by Willem30m View Post
I still did not see a clear answer to the question in this topic "How much money do you need to start daytading" And by starting daytrading I mean quitting your job & live off daytrading alone as your sole income.

By this standard, I would think I would need about 300.000 Euro to do it. Making a 10% net annual return would result in 30.000 Euro which is about my net annual income from my current employer, including pension, holiday pay, profit sharing benefits and tax returns.

What do you guys think? Is this a realistic figure? Looking forward to reactions from people who are actually trading for a living themselves.
Don't forget to include inflation, that is, roughly 2% of your profit will be eaten away by this factor alone. Then you have to take into account your future expectations. Will you be happy with 30k per year for the rest of your life? with a real job, your income would (hopefully!) increase as your expertise and seniority increases.

Add it all up and things start looking gloomy quickly, unless you have a lot of funds at your disposal, or you somehow manage to achieve greater than 10% return on your equity.

DISCLAIMER: I'm not a trader (yet). The biggest question I have right now is what is an attainable realistic return. If it's 10% per year, then this endevour is not realistic for me, as I don't have the funds available. If, as some seem to suggest, returns of 2% per week are realistic, then things start looking better. In the end, the only way to find out for sure is to actually have a go.
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Old Dec 22, 2010, 8:45pm   #26
 
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re: How Much Money Does a Trader Need To Start Trading?

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Originally Posted by upacs View Post
DISCLAIMER: I'm not a trader (yet). The biggest question I have right now is what is an attainable realistic return. If it's 10% per year, then this endevour is not realistic for me, as I don't have the funds available. If, as some seem to suggest, returns of 2% per week are realistic, then things start looking better. In the end, the only way to find out for sure is to actually have a go.
Some strategies can return 8% to 10% per month. These strategies tend to be high probability trades with modest to good returns. However, failure can eat up several months income.

If this is a job, it's like being fired. Traumatic, but not disastrous.

Your system consists of a strategy and you, the trader. A successful strategy can still yield unsuccessful results if the trader is not performing well. You need a method of detecting trader failure and/or strategy failure.
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Old Dec 22, 2010, 11:53pm   #27
 
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re: How Much Money Does a Trader Need To Start Trading?

My experience is a as follows. Like all forms of gambling trading Forex is tricky and it takes time to understand the market. You find some of the very best systems will work for a few months and then fall foul. The reason is that the market continually changes. If you look at some of the leading pundit sites returns of 5-10 % look realistic. Other system scalp a few points which is ridiculous and unsustainable. See how long you can keep scoring a few points for before you lose your marbles - dont go there !
Some systems will give results of 8 and 10 % but because of the way the market is you need to look at these results over a period of years. It is possible that systems can be tuned to hit the mark for 3 or 4 months.
Do not underestimate your own time, performance and consistency requirements. The percentages are so thin that you cannot afford to miss anything. This also means that you will not be trading where there is doubt in the forecast. If you are new to trading do a significant amount of research on what the professions can return and try not to get lost in the mumble jumble site figures and cool graphics. So if you have all the right characteristics and can rise unscathed from a few big hits – Its also very easy to get trapped into positions even for experienced traders. So in summary if you want a 50K return each year you will need to have a pot in the order of 1/2M. I suspect it will take a few years to be trading these levels for most. Best approach is to start small, do your paper trading, see it as a hobby, stick to a few reliable sources for sentiment and technical analysis.
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Old Dec 23, 2010, 7:41pm   #28
 
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re: How Much Money Does a Trader Need To Start Trading?

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Originally Posted by upacs View Post
Don't forget to include inflation, that is, roughly 2% of your profit will be eaten away by this factor alone. Then you have to take into account your future expectations. Will you be happy with 30k per year for the rest of your life? with a real job, your income would (hopefully!) increase as your expertise and seniority increases.

Add it all up and things start looking gloomy quickly, unless you have a lot of funds at your disposal, or you somehow manage to achieve greater than 10% return on your equity.

DISCLAIMER: I'm not a trader (yet). The biggest question I have right now is what is an attainable realistic return. If it's 10% per year, then this endevour is not realistic for me, as I don't have the funds available. If, as some seem to suggest, returns of 2% per week are realistic, then things start looking better. In the end, the only way to find out for sure is to actually have a go.
You're right, I didn't even think about inflation yet. For the past 3 years it really was my dream to start daytrading, but lately I am really starting to doubt if it will be possible. The amount of money is takes is not something I have available right now, or anywhere near the short team. If I would get my capital up to 300.000, it would probably take me around 20 years of modest living and saving... by that time I will be around 50 and there may not even be a point anymore, because by then early retirement may be coming to the horizon. Why would I want to take large risks by then, closing in on the finish line. And that's even without inflation like you said.

So the only way to make this work is to up the returns, or move somewhere where you can live on less income. However, I doubt anything above 10% is very realistic. I mean, sure you can make 10% profits from time to time, but also consider your losses, commissions, data costs, hardware costs depreciation etc. After adding it all up at the end of the year, and your bottomline is still +10%, I think you're doing very well indeed, considering 90% of all traders lose money.

I mean guys like Bernie Maddoff only gave 10% returns a year and that guy was considered to be a very good trader before he turned out to be a fraud.

So unless you move to very high risk leverage products, which I think are really alot of crap, I don't think anything above 10% is very realistic. But I hope someone can convince me otherwise because I still like the idea of trading for a living better than a daytime job.
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Old Dec 23, 2010, 8:54pm   #29
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re: How Much Money Does a Trader Need To Start Trading?

Hi Willem,
You strike me as being a cautious and conservative person. Someone not prone to excessive risk taking, who weighs up his options carefully and makes informed judgements. You probably abhor gambling and if you ever did gamble, you'd do it for enjoyment and not with any expectation of winning. All of these are, broadly speaking, attributes which will serve you well in life, IMO. The flip side of this coin, is that you're only 30 (or there abouts) and you seem to have concluded that the trading game is not for you in spite of the fact that it's been your dream for the last 3 years. Give up on it if you want, but it would be a shame to walk away from it for the wrong reasons, based (potentially) on false assumptions. Based on your last post, I fear this is what you're doing.

1. You're assuming a 10% return which would require a £300k account to generate an annual income of £30k. There are traders who make this much in a month. Who's to say you won't be one of them? You won't know until you try. Paper trading is free; so it will cost you precisely nothing to find out!
2. Focusing on what you need in terms of starting capital can only be done when you have some trading results to base it on. Develop a trading methodology and trade a small account (i.e. £500 or so) and see what percentage gains you can make consistently. Even if you 'only' do 10% p/a, you've got a great platform to build upon. Speculating about your returns before you have developed a profitable methodology is putting the cart before the horse.
3. In twenty years time you'll be an old man of 50 and thinking about a pipe and slippers - not about day trading the financial markets. Well, I have news for you. I've recently turned 50 and I'm a day trader. Trust me when I say you'll think differently when you get there - or do I mean here! I apologize if this sounds patronizing - it's not meant to be.
4. "So unless you move to very high risk leverage products, which I think are really a lot of crap I don't think anything above 10% is very realistic." Risk is only dangerous if you don't understand it. Once you understand it and are crystal clear about how to manage it, it can be kept to a minimum. Not eradicated completely, obviously, but minimised as much as possible. This applies to everything, including highly leveraged derivative products like futures.

I would argue that to have a meaningful and fulfilling life - you're going to have to take many risks along the way. Some of them will be way bigger than trading the markets, e.g. marriage. Again, I speak from experience! To conclude, I think you need to toughen up and knuckle down, focus on your dream and pursue it. Quitters never win and winners never quit etc. Go for it!

Tim.
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Old Dec 23, 2010, 11:52pm   #30
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re: How Much Money Does a Trader Need To Start Trading?

Willem

You are following a very very similar thought pattern to myself. Based on your post I'd say you are where I was about one year ago. This is what I have concluded/learnt in the year since then

1. You just don't know what returns are possible. You can read lots about it, ask here in the forum, you can speculate, but until you actually develop a strategy and start implementing it, you just won't know what is possible, and no amount of speculation will change that

2. It's true that the "big boys" don't make much more than 10%. Heck, 2% above S&P500 consistently year after year is considered very good, if not amazing, performance from a hedge fund. The key being _consistent_

3. There is something you are not taking into account. Trading millions or billions is an entirely different game to trading a few thousand dollars/pounds/euros. When trading such large sizes, there are many opportunities that simply aren't there

4. I even thought about the moving to a lower cost location, which is still very much on the plate, but I'll consider if I ever decide to leave my job and trade full time. Sunny Spain sounds appealing

I know it's possible to make money consistently in the market. In a firm I used to work (major IB), there was a guy doing algorithmic trading in German bond markets, and was making consistent money. Not earth shattering, but consistent.

You sound just like myself. Analitical, likes to weigh all options, very risk averse, dislikes gambling. All strengths based on everything I've seen/read so far.

By all means, keep researching, but you won't get a straight answer. Your only options will be either to give up, or to go ahead and invest the time to develop a strategy.

As for myself, I've decided to answer this question once and for all. I'm currently starting to develop a business plan (this is a business venture after all) which will require some time investment initially (to develop the methodology/strategy), and assuming all goes well, some money investment to try out the strategy(ies). If it all works, great, I'll consider it as a full time career. If it doesn't, I'll have invested the time in getting the answer(s) I was after, close this chapter, and move on.

It'll probably take me a couple of years to answer my questions, but at least I won't left wondering "what if" for the rest of my life

I hope that helps, and best of luck!
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