Account Size

[milesy]

Hi,
Just wondered on fellow traders views on the account size required to safely make a comfortable living, say $3000 per month on the Emini S+P .
Bearing in mind proprietary traders and hedge funds are trading upwards of 1000 contracts some days, who are we to think that we can make a living trading 3 ?
In fact is there anyone out there trading small size and making a living without taking huge risk?
Milesy.

 

[Rhody Trader]

It depends on the rate of return you can consistently produce. If that's 10%/mo for example (which I think most folks here would probably put on the aggressive end of the spectrum) then $3k would require a $30k stake.

Keep in mind, though, that the $3k needs to cover ALL of your needs, including taxes and all that other stuff an employer might normally cover. It should also incorporate a savings element, otherwise you're just treading water.

 

[ektrader]

3k a month is very reasonable if you're trading 3 contracts as long as you know what your doing. I don't know your experience level but let me warn you if your new to trading. As you already know, a lot of hedge funds and deep pocket professional traders trade the S&P and they manipulate small money often. There are many futures contracts to trade that can earn you a nice living. I don't know why so many newbies are eager to be eaten alive by the big boys. Trade a contract that's a little slower moving and more methodical until you master your setups (whateverthey are). Then step up to the S&P if that's what you want.

Ektrader

 

[milesy]

Well thanks for the replies ,
I ask this because I really do think a lot of people have very unrealistic expectations as to what they can achieve in the markets. I myself have been paper trading and working on a trading plan for 3 years now with a view to trading a $20,000 account up to something that would eventually make me very wealthy indeed.
I am sure that my expectations are a lot more conservative than some other traders out there who think that you can double your money every month. Well I think these people need to wake up and also I think that people should realise that if they expect to earn a consistent living from trading without excessive risk then they will need an account size far in excess of $100,000 in my opinion. That is what I have now come to realise
Anyone who denies this is in a fantasy world.
I posed the same question to Dr Brett Steenbarger whom I have immense respect for and here is his reply:
¨I think you're asking the right questions. If you're learning to trade and doing the learning process right, I don't think it's time wasted even if you're undercapitalized for the purpose of trading for a living.
$2000 per month on a $20,000 capital base would mean that you would more than double your money year in and year out. That is not credible. No one in the professional trading world that I work with--and I work with some top hedge funds--comes close to that. Anyone who claims such returns would be managing large pools of money, not piddling around offering Web services. I sincerely doubt that anyone claiming those returns has offered independently audited account statements to back their claims.I think $20,000 is certainly enough to fund a learning curve; from there, you either want to raise more capital to trade for a living with reasonable risk or you want to think about trading prop capital. Hope that's helpful, even if it's not what you'd ideally like to hear-- ¨

Milesy.

 

[ektrader]

If you're trying to trade stocks. I agree with the doc. If you're trying to trade forex, futures, or options. You can definately do this. At some point your gonna have to get in there with real money, trade, and take your lumps. learn to trade properly and don't lose your house. Even if your strategy is bad, THE WINNING TRADES WILL COME! just don't lose all your money. Learn to manage you money and trade properly first.

ektrader