by Gavin M.
One of the questions I get asked almost constantly is how much money do you really need for trading. I'll give you a quick answer:
For Futures: $5,000
For Forex: $10,000
For Stocks/Options: $5,000
In the realm of stocks/options, you have to deal with PDT (look it up if you don't know). PDT requires you to have $25,000 in order for you to daytrade stocks. Yes, the SEC are jerks that way. If you have less than $25K, you're going to be restricted IF you have a margin account. If you have a cash account however, do whatever you want, there is no minimum account size.
Why is Forex more expensive? The reason for this is because you're dealing with leverage. Most forex brokers will give you 1:25 or 1:50 leverage to start. So with a $10K account, you get $500,000 buying power. It's important that I emphasize that these are my recommended account sizes to ensure that you're in a good spot to take losses when they inevitably happen. Most forex brokers will allow you to have a $1,000 account size but what happens when you are in a trade with 1 lot and you lose 100 pips? Your account is toast!
Futures at $5,000 is satisfactory. You'll be able to daytrade a wide range of futures products with $5,000. It would also be desirable to trade during the US markets open as that's when there's most volatility and liquidity.
Of course, more is better than the recommended amounts above. I have seen a lot of people open micro-accounts and end up burning all of it up. The reason for not being to get back up on your feet with small accounts is exactly in the description of the account - small. Imagine having a $1000 account and you took a $200 hit on an options trade. So you have $800 left. You try to make that back up but now you're at 80% firepower.
Take the other scenario: If you have a $10,000 account and you took a $200 loss on a trade. You have $9,800 left to get that money back. So you still have a bigger chance of recovery than the fellow with $800. It all seems so easy to go over all of this from an analytical perspective. What most traders do lack is the WILL to take a loss when the trade is going against them. This is why you see people lose $500, $1000 or even higher. In this day and age of HFT stop-hunting that sees your stock move $5 in just 2 mins, your stop limits may not even be triggered.
In the end, I am going to be brutally honest with you. If you don't have enough capital: DO NOT TRADE. Raise as much money as you can before going into this business. This business can seriously make you rich or make you poor if you don't have good self-control.
by Gavin M.
The happy people over at Equity Sense have asked me to let the everyone know that we're doing a training blitz. We've always found that the spring and summer months are perfect for taking some real training on how to effectively read the charts, understand the markets and be a consistently profitable trader.
If you're one of the super excellent, mega fantastic, awesome, NEVERLOSE type of trader then you should stop reading past this sentence. This training is not for you.
If you are serious about being a trader and have been trying to get a good mentor, have a chat with us. We can talk to you on the phone or on Skype. What we provide is a personalized training service that ensures you absorb the content. This isn't some stupid 3-day weekend type of training that leaves you hanging and more confused.
What are we providing this Spring and Summer?
Full Training of Stocks and Options Fundamentals for:
US$ 5,500 - Discounted rate. (Regular price for non-clients is $7,500).
For groups of two or more, the rate gets even lowered to $4,000 per person.
What do you get?
- Full course documents
- Recorded classes accessible any time online with no access expiration
- Training tailored to your schedule and interests
Classes are available for Futures and Forex too.
If you are interested in knowing more, please hit the Contact page above and send us a note. :)
by Gavin M.
I've been at this for several years now. I trade different markets - futures, forex and of course the stock markets. Out of all the markets, the stock market generates the most intrigue and speculation. Before you read further, please know something: just because I hate the stock market does not mean I don't like trading. On the contrary, I like trading stocks but I hate the market they are in because of all the lies, deceit and rampant cheating.
The stock market is the only place where funds and banks who are active in trading stocks can also issue upgrades and downgrades to drive prices up or down. Imagine you own a Ford dealership and you also give good and bad reviews on the Ford vehicles on your lot depending on your mood of the day. It is after all, legalized promoting really depending on your position. If you feel like shorting today, you short the stock then issue a press release the next morning saying you're underweight or you changed your rating to a SELL. Voila! Instant profits. The best part? It is all LEGAL.
I will not discuss the issue of HFTs because you know, what is the point. I can write thousands of lines about it and it will still be around and as contentious as ever. The other reason I dislike the stock market is the fact rumors can be spread so easily. Why? Because they distort the fundamentals and the day to day swings of the price. Again, before you vilify me, I like trading these rumors because 90% of the time they are false. But I hate the rampant rumor mongering because it just ruins the overall longer term trade setup.
Last but not the least we get to the final reason I really despise stocks - the fabricated GAAP / Non-GAAP earnings reports. These numbers are made to be complex yet "good-looking" to fool investors into thinking the company is doing fine. All you need is a very creative accountant or CFO and you will have a nice looking earnings report that can even impress your dog. If you decide to ask a company to get an independent auditor instead, well the easily-bribable folks over at PwC or Deloitte are always ready to make it look like their findings also affirm what the company is doing GAAP or non-GAAP!
In the end, the markets remain the fastest place to increase or decrease your invested capital. However, it is increasingly fraught with hazards that remain invisible to the mom and pop investors. You can do away with some of these hazards by indexing or by only investing in blue chip stocks. But, at the end of it all, if you get in at the wrong time, you still stand to lose a lot of your investment.
Giddy up folks!
Traders from Equity Sense will be writing on this blog on positions and other market-related things.