Hi Apakhabar; Those are great questions, and I'd like to take a swing at them, as they bring up the constant question for traders: How much size to put on?
If the three traders trade the same size, then the gain is going to be the same for all three accounts. (Other than interest.) So part of the answer to your question, at least the part that distinguishes between the three account sizes, depends on how the trader determines the size of his trades.
(1) Margin rules. The SEC has rules for individual traders. If these rules apply to the trader, then the $100,000 account will be able to buy size 4x the $25,000 account.
(2) Risk limitations. General practice for experienced traders is to limit their risk on any single trade (or collection of correlated trades) to 2% of their equity. Since the $100,000 account has 4x as much equity, he can risk more on a trade, and that means he can put on more size. (Though possibly not as much as 4x as much size, as larger size is harder to exit from.) For the $100,000 trader, 2% of his account is $2,000. If he is trading a stock that he believes he can hold his losses to $0.625 per share, then the maximum size he can put on (and remain within the 2% per trade risk limitation) is $2,000/$0.625 = 3200 shares.
(3) Market rules. Some markets (or some order entry types, like the old SOES limitation) will limit the maximum size a trader can put on. These shouldn't be much of a concern for a guy with a $100,000 account.
(4) Liquidity limitations. It may be that it is impossible to trade over a certain size because that many shares are not generally available. Or available only well away from the market. There are stocks I've traded where my 500 shares was the only trade of the day. (Don't try to daytrade these...)
Of these limitations, the one almost always ignored by neophytes is #2.
As far as the average daily gains (after commissions), I will call "respectable" to mean that they are able to stay in the game. The amounts you quote are a lot less than the equity a typical MM would have available, so the gains are going to be a lot less. So my guess is $75, $150, and $300 per day. Further, I would guess about 10 to 20 round trips per day. (In other words, a lot of hard work.)
-- Carl |
