How much capital do you need to trade full time?

[fastnet]

Thanks Dave - so, in answer to the premise of the thread you would need much more than £50K and a steely conviction that your strategy was not going to pack in overnight before you traded full time.

Creech - I take your point about differing incomes required. However if we assume a nominal £25K after tax what would you (one) need in a trading account?

I still believe you'd need much more than £50K in order to survive drawdowns and operate sensible risk management for the very reasons that Dave 1971 pointed out. You'd also want to increase your pot so would want to make maybe 1.5 times the amount you needed to spend every month.

 

[Creech]

Personally if i were to go full time i would ideally need to make between 20-25 points per day with min requirements (i.e. mini dow = $5). Then again take away my travelling expenses and that would probably go down a bit. Therefore i would prob require £3,000 to get started. This would cover my margin and allow for any losses.

The way i look at it is, if i cant make money with this then its not worth for me personally to risk anymore.

 

[TheBramble]

On the other hand...

Perhaps the issue isn't so much 'how much capital do you need to trade full time?', but more 'Can you get away with trading what you currently have even though it's not bringing in enough consistently to warrant you not having a day job, but you really don't want to be doing anything else?'.

I think with the right 'heart' and skills - the issue of capital and providing a living eventually take care of themselves. In my book, you need to take the plunge - with faith in yourself first - not wait for a specific amount.

 

[longshot666]

dont think so

I think it is time for some skepticism. Let's do some simple math.
If you started with $10,000 and got a 30% a month return, this is how your money would grow:

10000
13000
16900
21970
28561
37129.3
48268.09
62748.517
81573.0721
106044.9937
137858.4918
179216.0394
--------------------------
179K in 1 year

232980.8512
302875.1066
393737.6386
511858.9301
665416.6092
865041.5919
1124554.07
1461920.29
1900496.377
2470645.291
3211838.878
4175390.541
-------------------
4.1 million by year 2


5428007.704
7056410.015
9173333.019
11925332.93
15502932.8
20153812.64
26199956.44
34059943.37
44277926.38
57561304.29
74829695.58
97278604.25
------------------
97 million by year 3

126462185.5
164400841.2
213721093.5
277837421.6
361188648.1
469545242.5
610408815.3
793531459.8
1031590898
1341068167
1743388617
2266405202
----------------------
2.2 BILLION by year 4


FOREX liquidity guarantee's you will not hit any limits until you reach many millions.

So if anyone thinks 30% a month is reasonable, even if you are using leverage, then you must also believe that becoming a billionare in just 4 years starting with 10K is also reasonable.

Sorry, but I must call bull****. If you think otherwise, show me just one trader that has accomplished this type of return in 4 years in real life.

im presuming you mean un-leveraged returns??

with leveraging, 30% and above per month is not unfeasible.

 

[CityTrader]

One thing that I may have missed as I skimmed over ( as usual) the thread, is that you do of course depending on the instrument you trade get up to 20 times gearing on your money ( maybe more? best deal i have is 5% margin for some of my stock positions..) So... does that mean £10K in a trading account is really £200k trading capital ? You are of course liable for the losses ( up to £200k in this example) Either way, I use more, and need to make a lot more( 1 wife, 2 German cars, 2 properties, 3 kids, and an addiction to gadgets!)

 

[fudgestain]

I think it is time for some skepticism. Let's do some simple math.
If you started with $10,000 and got a 30% a month return, this is how your money would grow:

10000
13000
16900
21970
28561
37129.3
48268.09
62748.517
81573.0721
106044.9937
137858.4918
179216.0394
--------------------------
179K in 1 year

232980.8512
302875.1066
393737.6386
511858.9301
665416.6092
865041.5919
1124554.07
1461920.29
1900496.377
2470645.291
3211838.878
4175390.541
-------------------
4.1 million by year 2


5428007.704
7056410.015
9173333.019
11925332.93
15502932.8
20153812.64
26199956.44
34059943.37
44277926.38
57561304.29
74829695.58
97278604.25
------------------
97 million by year 3

126462185.5
164400841.2
213721093.5
277837421.6
361188648.1
469545242.5
610408815.3
793531459.8
1031590898
1341068167
1743388617
2266405202
----------------------
2.2 BILLION by year 4
..

I like the figures, Longshot of the Devils 3 Sixes.

Careful attention to staking doesn't get mentioned much on trading BB's. It happens to be absolutely key to capital sum accumulation. To raise your stake pro rata in line with net profit additions means your capital manages the multiplication growth.

The assumption however is that whatever you are doing you are doing it consistently well, I would say, daily, and averaging a high return.

But then I use a predictive system to give me accurate steering pre-market and intra-day. Of course each to his own as to methodology and success rate.

 

[fastnet]

Longshot666 - I suppose that was my point really - its difficult to stick to a claim of 30% per month on yr account (did anyone actually claim this?) w/o explaining why you aren't appearing in the Sunday Times Rich List. A few years of 30% compounded returns has a similar effect - I suppose taking cash out to live on would slow the accumulation in the early years but still. . . .

so - where does that leave us? Can you make a consistent 30%+ per year. I'm not sure If it were then you'd need a min pot of £84K to give you an income of £25K (more or less a consensus of the requirement) w/o any accumulation.

As for gearing/leverage etc I think this is a red-herring - all it does is increase the % of yr pot you can stake on any trade.

any other thoughts before this thread tails off - I agree that stake size, risk and acceptable drawdown gets much less attention that it deserves - assuming you have a consistent net positive system management of risk is all that stands in the way between early wipe-out and true financial Independence.

 

[chump]

I would have thought that a return of 30% pa is theoretically possible ,but practically, extremely difficult for logistical reasons...increasing size is much more likely to bring about a diminishing return...hence perhaps why some very successful traders have to take the 'hands off the wheel' and start building trading organisations..

 

[henry766]

totally agree with long shot , if your consistently profitable you won't have to wait long before your rich, i suspect most of us couldn't make a living on top of a million pounds simply because we arn't as consistently profitable as we think we are!! ( with velocity futures 50pips a week on euro doubles u approx every 2 weeks on day trade margin globex , which compounded at end of year is more money than in known universe, and no offence chump , but outgrowing the fx mkt is a lovely thought!!

 

[trendie]

one of the problems here is - tax !!
at the end of each year, Mr Chancellor will come knocking on your door to exact his share.

Also, being a "small guy", you can beat the market.
However, at some point, if your trading becomes so large, you cant beat the market, because, you become so big, you BECOME the market, and your actions may actually influence the very market you are playing.

Isnt this the problem with the big funds, they are so big, their actions move the markets.

 

[starspacer]

Where Are The Customers' Yachts

Here is an interesting excerpt from a book entitled Where Are The Customers' Yachts by Fred Schwed:

​

​

A Brief Excursion into Probabilities​

There is a mathematical demonstration of what would happen, what must happen, if a large number of men were set to playing a game of pure chance against each other. The demonstration is interesting, but the reader must determine for himself whether or not it is analogous to Wall Street speculation. Here it is:

Let us have 400,000 men (and women) engage in this contest at one time. (Something like the number in this country who try being speculators.) We line them up, facing each other in pairs, across a refectory table miles long. Each player is going to play the person facing him a series of games, the game chosen being a matter of pure luck, say matching coins. Two hundred thousand on one side of the table face 200,000 on the other side.
If the reader is at all mathematically inclined he should cease reading and work out for himself what is now bound to occur. Otherwise:

The referee gives a signal for the first game and 400,000 coins flash in the sun as they are tossed. The scorers make their tabulations, and discover that 200,000 people are winners and 200,000 are losers. Then the second game is played. Of the original 200,000 winners, about half of them win again. We now have about 100,000 who have won two games and an equal number who have been so unfortunate as to lose both games. The rest have so far broken even. The simplest thing from now on is to keep our eyes on the winners. (No one is ever much interested in the losers, anyway.)

The third game is played, and of the 100,000 who have won both games half of them are again successful. These 50,000, in the fourth game, are reduced to 25,000, and in the fifth to 12,500. These 12,500 have now won five straight without a loss and are no doubt beginning to fancy themselves as coin flippers. They feel they have an "instinct" for it. However, in the sixth game, 6,250 of them are disappointed and amazed to find that they have finally lost, and perhaps some of them start a Congressional investigation. But the victorious 6,250 play on and are successively reduced in number until less than a thousand are left. This little band has won some nine straight without a loss, and by this time most of them have at least a local reputation for their ability. People come from some distance to consult them about their method of calling heads and tails, and they modestly give explanations of how they have achieved their success. Eventually there are about a dozen men who have won every single time for about fifteen games. These are regarded as the experts, the greatest coin flippers in history, the men who never lose, and they have their biographies written.

Admittedly, it is preposterous to suggest that stock speculation is like coin flipping. I know that there is more skill to stock speculation. What I have never been able to determine is-how much more?

​

​

] ​

The moral to be taken from this is that no matter how good a trading system is, you must always assume that it is luck unless you have traded profitably under every type of market condition. Unfortunately, there seems to be a natural 'law' that says that just when you have traded every type, a new one springs up that causes ruin.

Good luck to all those traders who are going to convert their £2,000 to £6,000,000 within 5 years, I suppose it is possible to flip heads a million times in a row, I just haven't heard of anyone doing it.​

 

[trendie]

Ahhh.... coin-flipping...... halcyon days.....

the good old days before CCI and Stochastics.

 

[starspacer]

Stochastic/cci

Good luck in a trending market!

 

[longshot666]

I was addressing the quote "with leveraging, 30% and above per month is not unfeasible." The claim was that it is not unfeasible(with leverage). I am showing that it is pretty unfeasible. 30% a year is much more feasible, and I believe some of the market wizards have achieved this for at least a good long streak. I just cringe when people talk about returns like this and give newbies extremely unrealistic expectations and dreams.

Longshot666 - I suppose that was my point really - its difficult to stick to a claim of 30% per month on yr account (did anyone actually claim this?) w/o explaining why you aren't appearing in the Sunday Times Rich List. A few years of 30% compounded returns has a similar effect - I suppose taking cash out to live on would slow the accumulation in the early years but still. . . .

so - where does that leave us? Can you make a consistent 30%+ per year. I'm not sure If it were then you'd need a min pot of £84K to give you an income of £25K (more or less a consensus of the requirement) w/o any accumulation.

As for gearing/leverage etc I think this is a red-herring - all it does is increase the % of yr pot you can stake on any trade.

any other thoughts before this thread tails off - I agree that stake size, risk and acceptable drawdown gets much less attention that it deserves - assuming you have a consistent net positive system management of risk is all that stands in the way between early wipe-out and true financial Independence.

 

[donaldduke]

longshot666,

Its defintely possible to turn $10,000 to $1 million in one year.
Larry Williams and others have done it.

The best floor traders on the Merc could probably do it year in year out too.

Find a system that averages 6% a month with 1% per trade risked. Then increase your risk to 5%.

This will make 30% a month. You will probably also lose 30% in some months and this is why
nobody tries it too often.

At some point you will hit a ceiling with the amount you can trade: You start getting more
and more slippage on your orders and you cant make 30% a month anymore.

Then you need to find more and more different systems/markets to trade. And thats what
seperates the market wizards from the rest. They can make 3% a month with less than 1%
risk per trade on hundreds of millions under mangement.

 

[longshot666]

Larry Williams did not do this for years and years and is why he sells books to make a living now.
Gambling huge and finding yourself on one end of the bell curve based mostly on luck does not count. (This is similar to being one of the coin flippers in the previous post who flips heads 10 times in a row). Ask Larry Williams if he can do that again this year, he cant.

As for the Merc floor traders, name them and provide their trading records over a period of many years and we may believe you.

30% a month consistently over several years is not reasonable.

longshot666,

Its defintely possible to turn $10,000 to $1 million in one year.
Larry Williams and others have done it.

The best floor traders on the Merc could probably do it year in year out too.

Find a system that averages 6% a month with 1% per trade risked. Then increase your risk to 5%.

This will make 30% a month. You will probably also lose 30% in some months and this is why
nobody tries it too often.

At some point you will hit a ceiling with the amount you can trade: You start getting more
and more slippage on your orders and you cant make 30% a month anymore.

Then you need to find more and more different systems/markets to trade. And thats what
seperates the market wizards from the rest. They can make 3% a month with less than 1%
risk per trade on hundreds of millions under mangement.

 

[TheBramble]

Larry Williams did not do this for years and years and is why he sells books to make a living now.

Are you sure about this?

LW did, and still does, do this - live. He also lectures and writes books.

 

[Roberto]

There seems to be a little confusion in one or two of the posts above about making 30% per annum, or 30% per month(!). One or two of the people interviewed by Schwager in "Market Wizards" and "The New Market Wizards" can apparently claim profits of 30% per _year_, and these are, for obvious reasons, people who end up getting books written about them. People who envisage that they can consistenly make 30% per _month_ are ... how can I put it politely? ... among the more "optimistic" traders. Anyone can have a spectacularly good month (and twice during the last 4 years I've managed myself to make 30% of my total bank as profit in a month - but my bank was much smaller then and I was reckless as well, with hindsight!) but if anyone does it consistently I certainly take my hat off to him.

 

[schoe]

I'm confused here, Longshot are you talking about investing for long periods or daytrading. Of course it all depends on your account size but there are traders who make 30% per month daytrading stocks and futures with very little risk
I know of some futures traders who do this month in and month out. And have you read the book The Stock Trader by Tony Oz he makes 30% detailing every trade for a month only being allowed to go long in a downtrending market.
Just because you can't do it or know anyone who does doesn't mean it can't be done I know someone who makes 700 pips per week on average trading the ym and I watch him trade live.

ps. And some traders do get very rich look at Zanger/Williams/Parnesss

 

[longshot666]

Daytrading, swing trading, whatever, people dont make 30% a month consistently for years and years.
You know some futures traders? Really? I guess they must all be billionares by now then, or is it that they have only managed this for a very short time, or only once in a while, or is it balanced by a 30% loss every other month??
So Tony Oz had one 30% month during the biggest boom of all time, so what. Is tony make 30% a month these days? How many years in a row has Tony Oz made 30% a month outside of the raging bubble from hell??? I guess Tony Oz is a billionare by now too huh? Dont think so.
You "know someone" who makes 700 pips a week huh? How long has he been making this average? Years? Is he also a billionare, since Forex liquidity is effectively endless???

I just love hearing about, I know so and so, and he makes 30% a month, but no one can ever produce a real name with an audited track record to prove it. Ever.

Let's put the hearsay aside, and someone bring some objective proof to the table that someone can make 30% a month over a course of years, acros serveral different markets, and not just raging bull markets, to prove it wasnt just being lucky and sitting on the tail end of a bell curve.




I have a feeling ill be waiting a long time. Sorry to burst peoples trading fantasies, but ive been trading a long time, and have some very nice returns, and I also know, 30% a month return, that is not an outlier, has never been proven.

I'm confused here, Longshot are you talking about investing for long periods or daytrading. Of course it all depends on your account size but there are traders who make 30% per month daytrading stocks and futures with very little risk
I know of some futures traders who do this month in and month out. And have you read the book The Stock Trader by Tony Oz he makes 30% detailing every trade for a month only being allowed to go long in a downtrending market.
Just because you can't do it or know anyone who does doesn't mean it can't be done I know someone who makes 700 pips per week on average trading the ym and I watch him trade live.

ps. And some traders do get very rich look at Zanger/Williams/Parnesss