I still think that $50,000 is not nearly enough.
You say:
"Any real good professional position daytrader should be
able to triple his account at minimum. "
I assume that you meant "in a year"? (If not, please clarify...)
OK, so you start with $50,000, and you triple your account in a year. So, you wind-up with $150,000 at the end of the year. Now, subtract $33,000 in taxes, and you are left with $117,000. But what did you live on? Like I said, it depends on your own living expenses, but if you are used to, as you say a "low 6 figure income", and have a family, house, etc. I'll bet you need $50,000/year in living expenses. Subtract $50,000, and you've got $67,000.
That's not quite all yet, though. Unfortunately, the mortgage company won't wait until the end of the year for their money. The constant drain from your account for living expenses is going to reduce your working capital and, thus, your earnings. Just a guess, subtract another $5000, so we're at $62,000.
There are going to be no expenses? Well, maybe not, if you use a direct-access broker that tosses-in free Level2. I don't though, as I beleive that you get what you pay for. $4200 for quotes. You're left with $57,800.
OK, well, our mythical trader who tripled his money really only increased his trading capital by $7,800, a paltry 15.8% return, but he DID manage to support himself through his trading.
What if it wasn't a good year, though? Are we to expect every year to be like the past one?
Now, let's see what happens if our trader keeps his day job, but only manages a 2X increase:
$50,000 x 2 = $100,000. Taxes, $16,500, quotes $4,200 - our trader is left with $79,300 at the end of the year, a more respectable return of 58% after taxes and trading expenses.
The problem with scenario "A" is that our trader - while getting a 300% gross return - which anybody will agree is stellar - only increased his trading capital by 16% - in the best year of stock market history! Better to stick it in mutual funds, even though, on average, they underperform the market.
On the other hand, is it possible to keep your day job and still make 200%? I think so, since I just did it while making a 1000% (BEFORE taxes :) ) return.
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BTW, I said my "typical" trade makes a point and lasts 5 minutes. Perhaps I should have said my "ideal" trade. That's the kind of trade I like. Of course, my actual trades vary widely - from 1/8 or less in a few minutes, to my "ideal" trade of a point or two on a 20 dollar stock in 5 minutes, to swing trades of many points on expensive stocks. For example, I traded 1000 shares of Conexant for a $20 profit last week.
Frankly, I doubt that I can optimize what I am doing much more - I have been roughly doubling my money every quarter - consistently. While I'm willing to allow for the possibility, I have dillusion that this rate of return will be possible over and extended period of time.
$50,000 just isn't enough. Anyone who thinks so is suffering from a dillusion. A common one shared by many, but a dillusion just the same. Yes, I think that anybody who actually DID this, starting, say, a year ago, would probably have managed to support themselves and made at least a small increase in their trading capital.
But if they think they did it because they are skillful (this is a market that makes everybody a genious...), and think they can continue at the same pace indefinately, I want to know where to get some of what they are smoking.
I think that $50,000 is enough if you are in a situation where you have no living expenses. It think it would be a particularly attractive option for somebody who currently has no living expenses, but expects them in a year or two. (A student? Someone planning to divorce their spouse. :) ) |
