What size account to start with?

[harrymonk]

Hi,
I have been paper trading and simulation trading on and off for a few years, over the last year I have tried to take it more seriously and have been live trading almost daily when I have the time.

I have blown 2 accounts so far, and I know it was due to bad risk management, and it is something I am working on. The thing I would like to know is what is a good sized account to start with if you're spreadbetting.
My first account was £500 (which I put an extra £500 into to keep a trade open) that account lasted me about 1 month
My last account I only put £500 it lasted about 3 months this time, I kind of realised also that by betting £5 a point and leaving a 100 pt gap wiped out half my account on 2 trades ( I had built up the account by then)....so my question, although aimed at account size might also be a good risk size on the account.

At present I am saving up for my next account, so anything more than £3,000 would take me more than a year to get up and running.

Thanks

 

[black bear]

Stick to paper trading for a few more imho

Hi,
I have been paper trading and simulation trading on and off for a few years, over the last year I have tried to take it more seriously and have been live trading almost daily when I have the time.

I have blown 2 accounts so far, and I know it was due to bad risk management, and it is something I am working on. The thing I would like to know is what is a good sized account to start with if you're spreadbetting.
My first account was £500 (which I put an extra £500 into to keep a trade open) that account lasted me about 1 month
My last account I only put £500 it lasted about 3 months this time, I kind of realised also that by betting £5 a point and leaving a 100 pt gap wiped out half my account on 2 trades ( I had built up the account by then)....so my question, although aimed at account size might also be a good risk size on the account.

At present I am saving up for my next account, so anything more than £3,000 would take me more than a year to get up and running.

Thanks

Hi harrymonk

Not having a go ~

Stick to paper trading for a few more years imho

You should be able to trade a £500 account with a sb firm and still not lose your account imho trading minimum stakes, even intra day so long as you do not trade less than the 15 min bars and your method aims to capture a fair bit of the days range

Check out some of the articles on the Home page of T2W, pick a method you like the look off and demo it till you are .....well making paper pounds, hell of a lot cheaper than the real ones for sure. Feel free to add and take away things, experiment and have some Fun.

If you can not make a paper pound, how do you expect to make a real one :?:

Good luck :clover:


Latter

 

[TheBramble]

Harry, stop.

You did well to last that long on just £500 using your innovative risk management techniques. (are you ex-Northern Rock by any chance?)

Get a demo account. Trade until you're making consistent profits while putting away your trading capital.

After 1 year of consistent profits and drawdowns not exceeding 10% in any one quarter, open a broker (NOT SB) account with a minimum of £10,000. It’s going to take more than 1 year to put aside £10,000, so carry on until you have £10K.

Once you’re up and running, do not risk more than £25 (0.25%) per trade for the first 3 months regardless of your successes.

Once you’ve established you can emulate your demo profile after about 6 months (yes, it might take that long) and you’ve still got at least 75% of your capital left increase your risk to up to 0.5% for the next 6 months. Then up to a full 1% after another 6 months.

If that seems too long, it probably is. In which case, take your next £500 to the bookies and place it to win on any outsider. Honest, in this situation, you simply bet the ranch, as longevity is not the issue and the odds favour you over the long term by making a one-shot-for-all gambit.

 

[Chorlton]

Once you’re up and running, do not risk more than £25 (0.25%) per trade for the first 3 months regardless of your successes.

Hello Bramble,

Although I agree with your comments, given the cost of comms, etc is risking only 0.25% of ones capital really realistic? I thought a more realistic % would have been between 2-3%?

Just interested,

Cheers,

Chorlton

 

[mp6140]

MP --- its all about LEARNING FIRST !

Hi,
I have been paper trading and simulation trading on and off for a few years, over the last year I have tried to take it more seriously and have been live trading almost daily when I have the time.

I have blown 2 accounts so far, and I know it was due to bad risk management,

===================================================================

I once did a demo over a period of a month or so, starting with $250 USD (which sounds like your 500 pounds closely enough) and kept doubling it during the test --- i did that because of EXPERIENCE and thats the only reason, but i was trying to show newbs what THEY could do once they learned a bit.

so my particular thoughts on the matter is to simply look around, listen well and LEARN, because the games not particularly hard to do, but without the knowledge, it simply looks like greek squiggles to most, especially a part timer like yourself.

If you CANT devote the time to learning, my advice would be to simply forgetaboutit --- while i consider it a game, there are land mines, roaming aliens and land sharks aplenty who will gladly take your money, grind you up into little pieces and leave you broken and bloody, while they wait for the NEXT one to step up with money !

understand its hard --- how do you find a system that works when you have no idea of what should be in a system --- how do you figure out where prices are going, if you havent a clue as to HOW to figure out where prices are going.

YOU will do one of two things --- you will either find a way, or you wont find a way --- thats basically what it comes down to !

i wish you luck, but be prepared to put in TIME, because trading is a whole new world, with its own culture and rules and the greatest traders live out there, just ready and willing to capitalize on ANY mistake you make and youve already proven how many you can make !

TIME is the answer and if you dont have it, perhaps you might try another game !

enjoy and trade well

mp

 

[harrymonk]

Thanks for the replies guys. Just to give you a bit of background on me.

On paper I make a profit, and I did manage it pretty consistently over about the 9 months I was trying it. I still paper trade on the side as I tend not to have much in the way of funds to bet all the instruments I would like to. I spend about 3 - 4 hours a day (at least) watching the markets and spend about 1 - 2 hours trying to learn about trading styles. On the yahoo trading simulator I always make a profit and normally in the top 50 traders.
My spreadbet demo account also was showing constant profit before I was blocked out for using up all my trades on the demo. I actually got my £500 real account up to £2000 on my second account, but then bust it in a couple of trades I kept open while at my day job)

I was worried about my main problem being the size of my account. All the simulations give you so much account size(100K - yahoo 10K - spreadbet), maybe I still need some more advice on how much to risk. It just seems that still only betting £1 a point on a £1000 account is too cautious? I don't know, just guessing... but any more feedback would be great.
Thanks.

 

[black bear]

double it

===================================================================

I once did a demo over a period of a month or so, starting with $250 USD (which sounds like your 500 pounds closely enough) and kept doubling it during the test --- i did that because of EXPERIENCE and thats the only reason, but i was trying to show newbs what THEY could do once they learned a bit.

so my particular thoughts on the matter is to simply look around, listen well and LEARN, because the games not particularly hard to do, but without the knowledge, it simply looks like greek squiggles to most, especially a part timer like yourself.

If you CANT devote the time to learning, my advice would be to simply forgetaboutit --- while i consider it a game, there are land mines, roaming aliens and land sharks aplenty who will gladly take your money, grind you up into little pieces and leave you broken and bloody, while they wait for the NEXT one to step up with money !

understand its hard --- how do you find a system that works when you have no idea of what should be in a system --- how do you figure out where prices are going, if you havent a clue as to HOW to figure out where prices are going.

YOU will do one of two things --- you will either find a way, or you wont find a way --- thats basically what it comes down to !

i wish you luck, but be prepared to put in TIME, because trading is a whole new world, with its own culture and rules and the greatest traders live out there, just ready and willing to capitalize on ANY mistake you make and youve already proven how many you can make !

TIME is the answer and if you dont have it, perhaps you might try another game !

enjoy and trade well

mp

mp

your fav Bear here


"I once did a demo over a period of a month or so, starting with $250 USD (which sounds like your 500 pounds closely enough) and kept doubling it during the test --- i did that because of EXPERIENCE and thats the only reason, but i was trying to show newbs what THEY could do once they learned a bit."

a month or so ~

10 doubles = £256,000

now if you demo that on T2W I am sure you will be given your own thread and other posters will have to get a pass before they post anything on it

all the best mp :clover:

 

[TheBramble]

Hello Bramble,

Although I agree with your comments, given the cost of comms, etc is risking only 0.25% of ones capital really realistic? I thought a more realistic % would have been between 2-3%?

HarryM has already indicated he fails on one of the most basic issues - he lets one or two REALLY bad trades rob him of his prior profits.

The discipline and control required to run with just 0.25% risk will ensure he NEVER blows it again (providing he has the discipline and control to really stick to the 0.25% rule). No one (or two) trades will ever have any chance of causing him grief. He can relax and stop caring. Absolutely essential for effective trading. For effective anything actually.

The hassle and constraints in finding and executing on a platform that will allow him to trade this size will also help refine those rough edges. Harry has already expressed some disinclination to even consider a £1/pt on a £1000 pot. He is, like most somewhat new to trading, mesmerized by absolute rather than relative gains.

If he can rein in these quite normal beliefs and stick to solid gruntwork of racking up the small, but ever increasing profits, this will establish the mindset needed to handle the increasingly bigger (absolute though not relative) risk as his account steadily grows.

If this seems an unattractive option, which it well may, then maybe HarryM needs to work it out for himself as have most of us. Takes longer and costs more, but sometimes, there ain't no remedy for it. You just have to learn the hard way and nothing anyone says here will make any difference.

Good luck Harry, whatever way you choose to play it.

 

[Chorlton]

I have blown 2 accounts so far, and I know it was due to bad risk management, and it is something I am working on. Thanks

Hello Harry,

To gain an understanding of where things may be going wrong, can I ask what your current Money Management rules are?

Chorlton

 

[harrymonk]

Thankyou all.
I think TheBramble has hit the nail on the head. (maybe get some more sense into the nail...lol)

My current trading plan seems way too over-extended. I am pleased to know that maybe £1 a point on a £1000 account isn't actually too small a bet (in fact in an ideal world it would be too much when my stop losses are at 50 - 100 pts). I think that hearing that from someone else is reassuring... I don't actually know any traders (until now) so mostly I am hit and miss tactics on what I read and what I do in the markets. Although I realise all decisions are my own anyway, it can be helpful to gain another's insight.

Chorlton, my money management is one of my main problems, that and exit. I have no problems entering a trade...lol. I tend to decide a price of exit and stick to it, but maybe I'm not good enough to decide where the right exit is yet.
At present I am working on a huge risk to little reward ratio as the account is so small in the hope that as it grows I can lessen the risk a little. I watch the markets every day and tend to place a trade or have one running every day. I was hoping to fly on the seat of my pants until I got 5K into the account and then ease off into a lot less risk... something more like 1 - 2 % although from reading the forums here that would seem too much.
The main other problem I have with account size and risk is because of the leverage you get with spreadbetting... does the risk then become a percentage of what the total bet is (or would be if you owned what was being lent to you) or is it still a percentage of your account?

Thankyou once again...seems like I'm not the only one who has trodden this path, so I am very grateful for the guiding I am recieving.

 

[Chorlton]

Chorlton, my money management is one of my main problems, that and exit. I have no problems entering a trade...lol. I tend to decide a price of exit and stick to it, but maybe I'm not good enough to decide where the right exit is yet.

Hi Harry,


From my experience one of the least important parts of ones strategy is the Entry Point. Most newbies focus solely on this but the truth is its the Exit condition & the Money Management rules that determines whether one makes a profit or a loss.... But at least you are now acknowledging this fact.

Also, its worth noting as well that the longer the timeframe being traded the less critical is the Entry point.

At present I am working on a huge risk to little reward ratio as the account is so small in the hope that as it grows I can lessen the risk a little. I watch the markets every day and tend to place a trade or have one running every day. I was hoping to fly on the seat of my pants until I got 5K into the account and then ease off into a lot less risk... something more like 1 - 2 % although from reading the forums here that would seem too much..

Although I understand your current frustrations, this philosophy will send you broke quicker than anything else!!! As Bramble (I think) has already suggested you would be better off NOT TRADING until you had a sufficient amount of capital to trade more appropriately.

Personally, I would take this "time-out" to look at your overall strategy and learn about Money Management / Position Sizing. There are plenty of threads on here which discusses these topics. In addition I can recommend a good book which covers this topic very well.

Can your current strategy be "coded"? If so, I would also take the time to backtest your ideas to ensure you have a strategy which has a POSITIVE expectancy.

The main other problem I have with account size and risk is because of the leverage you get with spreadbetting... does the risk then become a percentage of what the total bet is (or would be if you owned what was being lent to you) or is it still a percentage of your account?

Thankyou once again...seems like I'm not the only one who has trodden this path, so I am very grateful for the guiding I am recieving.

Risk and Leverage are two different animals. Leverage (if used correctly) will allow someone to take additional positions which normally could not be taken due to existing capital allocation. Thats it!!!

You would apply the SAME RULES to risk regardless of whether you were using Leverage or not.

Regards,

Chorlton

 

[new_trader]

Hi Harry,


From my experience one of the least important parts of ones strategy is the Entry Point. Most newbies focus solely on this but the truth is its the Exit condition & the Money Management rules that determines whether one makes a profit or a loss.... But at least you are now acknowledging this fact.

NO! This isn't good advice at all. Exit condition? How can you properly identify an exit condition if can't even identify an entry point? The truth is that entry and exits are equally important. Proficiency is what makes you profitable. Proficiency with entry and exits. If you are proficient trading 1 contract you will be proficient trading 10 contracts, 50 contracts and even 100 contracts. Do you see?

Trade with tight stops. What does tight mean? Good question. How many times can you afford to be wrong? In the early days you will be wrong many more times than you will be right. Keep the lessons as cheap as possible.

 

[Mathemagician]

If you're spreadbetting the optimal account size is zero. Save up until you can trade rather than gamble with a bookie.

jj

 

[mp6140]

mp

your fav Bear here


"I once did a demo over a period of a month or so, starting with $250 USD (which sounds like your 500 pounds closely enough) and kept doubling it during the test --- i did that because of EXPERIENCE and thats the only reason, but i was trying to show newbs what THEY could do once they learned a bit."

a month or so ~

10 doubles = £256,000

now if you demo that on T2W I am sure you will be given your own thread and other posters will have to get a pass before they post anything on it

all the best mp :clover:

===========================================================

NAH, i didnt take it that far bear, as i could only trade it part time (I DO have to make real money after all !) but i believe i doubled it to $4 thousand in that month --- i may still have the printout of it, so shall look in the files)

mp

 

[mp6140]

NO! This isn't good advice at all. Exit condition? How can you properly identify an exit condition if can't even identify an entry point? The truth is that entry and exits are equally important. Proficiency is what makes you profitable. Proficiency with entry and exits. If you are proficient trading 1 contract you will be proficient trading 10 contracts, 50 contracts and even 100 contracts. Do you see?

Trade with tight stops. What does tight mean? Good question. How many times can you afford to be wrong? In the early days you will be wrong many more times than you will be right. Keep the lessons as cheap as possible.

==========================================================

Im gonna agree with Chorlton, with a nod towards semantics.

Once i determine a decent trade is taking place, i can enter ANYWHERE i wish, as long as i know where my support or resistance exit point is ! Essentially, if its trending, I can lock in anywhere !

Now, bowing to what i perceive to be your thoughts, youre thinking that without experience the newb CANT figure either, which is ALSO a convincing arguement --- just depends on how much the newb knows.

presently trader dante is teaching his method, which is indeed a very good one, and he spends a lot of time on entries, and while i tend to enter sooner, his method is probably a lot safer for newbs.

mp

 

[Chorlton]

NO! This isn't good advice at all. Exit condition? How can you properly identify an exit condition if can't even identify an entry point? The truth is that entry and exits are equally important.

Maybe I wasn't clear in my explanation but the point I was trying to make is that one should focus more time (or at the very least an equal amount of time) on developing Exits than Entries.

I totally agree that without an Entry, one can't define an Exit but too many times people only focus on trying to determine the "perfect" entry. Maybe this is important when looking at very small timeframes but as the timeframe gets bigger, this requirement is less important.

I personally develop Long-Term mechanical strategies and have realised over time that refining the exit condition produces better results than focusing on the entry.

All IMO,

Chorlton

 

[mp6140]

Maybe I wasn't clear in my explanation but the point I was trying to make is that one should focus more time (or at the very least an equal amount of time) on developing Exits than Entries.

I totally agree that without an Entry, one can't define an Exit but too many times people only focus on trying to determine the "perfect" entry. Maybe this is important when looking at very small timeframes but as the timeframe gets bigger, this requirement is less important.

I personally develop Long-Term mechanical strategies and have realised over time that refining the exit condition produces better results than focusing on the entry.

All IMO,

Chorlton

===========================================================

as stated, im in full agreement with you as concerns those with some decent experience --- while the "perfect" entry may give bragging rights, it sure isnt necessary to keep the wolves from the door, but if you dont know where to exit, you be in deep trouble indeed !

certainly a good observation methinks !

mp

 

[Mathemagician]

If one's exits are not so important, why does one not simply eliminate the entries altogether and use one's exits as a stop-and-reverse system?

jj

 

[mp6140]

If one's exits are not so important, why does one not simply eliminate the entries altogether and use one's exits as a stop-and-reverse system?

jj

===================================================

outstanding idea --- can you code an EA for that ?

mp

 

[Paul71]

How can exits be more important than entries? You can't exit if you have not entered!?