Is $100,000 A Decent Capital In Trading?
I know there will be many opinions regarding this issue.
But this topic will surely help for those who are aspiring to trade for a living
Considering all the expenses on a monthly basis
Which could sum at least 3000$ in first world countries
i think (60 thousand) account is very enough.
with conservative money management: you can earn 5% profit monthly .
5% of (60 thousand) is (3 thousand) monthly.
that is a huge profit & will enable you to live a good life , even in the USA.
Don't go into Forex until you have "extra money".
Imagine you need money right now cause you have some difficulties. Okay. You start trading with your last money. And what about the result? Make a lot of mistakes and lose all the cash. All becauseof you are constantly nervous worried. And in this business you need to be as cool as possible.
Itís not even what capital should be. But how you are ready to multiply it or how much you are ready to lose.
Think about it.
-Any trader should trade with a balance of 500$ for the first 10 years of his life as a beginner trader. (rookie)
-That also applies to all the margin calls resets during the process (approx 50 margins calls)
-After getting rid of the rookie status (10 - 12 years later) He/she should still trade with a starting balance of 500$.
-There should be less margin calls at that point and eventually the trader will become successful after 15 years if he/she is still alive or in a good mental state.
Hope it helps. Btw this comes from a dinosaur trader (me) and 0% of this statement is a joke.
nice input btw.
This is where greed and fear kicks in
Margin calls are part of it. But how much capital you need is sufficient to trade full time?
Based on your experience
3 X monthly expense + 100 % in reserve
about 200,000 usd minimum assuming proven consistent profits based on at least 20 years of trading history
3rd world countries are far away from 1000$.
With 1000$ in you are filthy rich
The answer to this question is shockingly yes and no depending on what metrics one is using and safeguards.
Let's take 100K and everything else the original poster said
at face value meaning this is the funds one can use.
K=1000 and everything is valued in dollars.
Personally I would set aside a year worth of money for all expenses the amount being 36k. Meaning there is no risk of additional stress regarding the basic needs of living which imo is vital to healthy trading.
This leaves 64k left for trading. Assuming a 5 % gain month gain this would amount to 60% per year. 64*0.60= 38.4k profit per year.
The taxation differs per country but I will assume a flat 10% tax.
38.4*0.9= 34.56 K profit after taxes.
Now this would actually mean that the yearly expenses of 36k are higher then your yearly average profits of 34.56k leading to a net loss. I.e it's not enough money.
Now I find 5% per month laughable easy from my own experience.
I find 10% per month achievable and the tldr version = 57.6k gross profit minus 36k expenses coming out to 21.6k profit per year.
Another way to solve this is to to have a starting capital of 136k so that one can trade the full 100k and with a 5% gain would be 60k profit minus 6k from taxes 54k. And minus expenses 36k. Would be a yearly profit of 18k.
This is just one of many ways to explain this trading capital and income
For a country like South Africa which is considered a 2nd world country, neither here nor there or the preferred term, an emerging market. I would say an average family of 4 needs about R15 000 per month which equates to about $1046 at the current USDZAR exchange rate (R14.33 to the dollar), to survive which is a middle class life style.
So if you use Mingary's equation at 15000 X 3 = R 45 000.00 and 100% in reserve = R90 000.00 equals $ 6277 to live a middle class life style in SA.
Interesting topic. Thanks Pollen.
As a small addendum I'm going off a flat 60% yearly gain starting from the base amount of 64k not a compounding monthly gain of 5% which is 64*(1.05*12) order leading to a 114.9k totally asset value
you will need a huge capital to trade only if you are planing to trade using martingale, averaging, adding to a losing trades etc....
one more time noobs, quit the game, you will always lose even with 10 millions capital,, because the price follow only one thing "ur money"
I trade full time. Initially I thought that I could average 60% to 70% per year. However, after about 4 years, this average had dropped to 40% per year, and now hovers stable at around 35% per year on average. My opinion, if you want to look at long timeframe (i.e. >5 years) then somewhere around 30% to 40% per year is realistic.
How I did it? I started with 30K (scaled in over 12 months) and traded that up over many years to around 300K before I quit work. By all means, if you are confident that you can get 5% a month then do it with 100K. Just make sure that you're not fooling yourself by over-estimating your abilities. As you can see, I am very risk averse. You should be too. Your plan should be to trade full-time for decades, not a few years, otherwise you'll be back at your job again, which would suck. For sure, once you quit your job and trade full time, the primary objective is to never need to go back to your job.
If you haven't got any good performance record yet, then I would say trade for at least 12 months live on a small account (say 5K) to get an idea of your average monthly percentage, and then assume in future you will only get half of it. Then take your biggest drawdown over the 12 months and assume you will see one soon that's at least twice as large. Doing it this way will give plenty of wiggle room for error, and if it all works out then you can re-invest some trading profit to grow your capital further.
Other things I did before quitting work: All bills paid, home paid, cars paid, no loans, all tax paid, and first 12 months living expenses already in the bank account. Remove all overheads.
Best advice is to plan for the worst, take it slowly, and don't try any stupid funny games with calculations about your performance. It's the unrealistic expectations that will bring you back to reality, so ignore all the high % noise you see on this forum. They either won't be here in five years, or they'll be in the process of blowing yet another account. Remember, once you go full-time there is no option to blow your capital.
This is all pointless if you don't have your trading plan finalized though. What I did: Find one plan that works, no jumping from one plan to another, knew for certain that it works over decades of trade data, no discretionary trading, it's all rule based, no gut instinct, and automated it as much as possible, learnt mql4, wrote my own ea, use a VPS, split my capital across multiple brokers, worked on reducing trading expenses, and improving ea performance.
I'll probably be shot down for posting this, so I'm not going waste time pandering to any arguments about my performance or techniques at all. It's all just my opinion, and it has worked perfectly well for me with no surprises. Hope it helps you too.
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Sure, this will help a lot of traders with their expectations
Because many newbies think that they will be rich with 1K capital...
i imagine that you have win rate of 65%
risk reward 1:1
every trade will end with losing 1% of your account , or winning 1% of your account.
frequency: 20 trades per month (you open 1 trade every day).
at the end of the month : you will have 13 winners & 7 losers
total net profit : 6%
this will happen if all months are the same.
if you have losing month, then you need to calculate your profits on quarterly basis.
June:18 winners & 2 losers
July: 13 winners & 7 losers
august: 8 winners & 12 losers
at the end of quarter : you will have (39 winners & 21 losers) which means 65% win rate.
and you should withdraw your profits every quarter (not every month)
if you cant achieve 65% win rate at the end of quarter, then you should recalculate your win rate.
your true win rate may be 60% or even lower.
btw, i`m not experienced trader.
its just my personal imagination.
you said that you have been trading live for the past 2 years.
so, i think you have good statistical record to identify your exact win rate.
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