Barney,
Here's some advice. If you're trading with your in-laws' (or anyone else for that matter) money, lay out the ground rules with them ahead of time. I mean everything. And then put it in writing.
The first thing I'd do is be very candid with them. Tell them, "hey, from what I understand, there is a learning curve with day-trading. I fully expect to lose money for the first month or two." It is crucial that they know that upfront. They will tolerate your early losses a lot easier if they expect them, rather than thinking you are going to be "printing money" from Day 1 and then see the account take a $5000 hickey the first month.
Lay out all the parameters with them. Set daily loss limits (i.e. if I lose $x amount during the day, I will layoff and start again tomorrow). Get a set figure from them of how much money they can handle being down before they pull the plug on you. Outline how you are to be compensated and how frequently you can access your cut of the profits. Find out how often they need to be kept up to date on the progress/status of the account. Then, get it all in writing.
Getting all the bad stuff out of the way before you start is crucial. Believe me, I have first-hand knowledge of this. I wasn't trading for in-laws, but my "investors" were two of my best clients who were also close friends of mine. We all went into the partnership thinking that the toughest part of the deal was to find a wheelbarrow large enough to cart the money off every week. Beforehand, they were pretty non-chalant about potential losses, like "oh don't worry about losing money, it's no big deal...we're all gonna make a killing anyway." Believe me, talking about potential losses is a lot different than seeing them on your account statement. Your investors' tune is bound to change once they experience the losses first hand. I know I felt my investors would've been much more tolerant of the first month losses, and I was wrong--they flipped out. Maybe if they would've been prepped for the possibility that the first month can be expensive tuition and I had everything in writing, I'd still be daytrading. Getting it all in writing is just a good business practice--everyone will be on the same page.
I'm guessing that you will be giving up your present career to pursue day trading. With that in mind, you definately want to go over all the potential pitfalls with your in-laws. It would be better for your in-laws to tell you "wow, we didn't realize we could lose money, we'd better not do this..." ahead of time, rather than them going into this with high expectations and then seeing you down $5000 after a month and saying, "Barney, we didn't realize it was gonna be like this, so we're going to pull the account." Then you're in the precarious position of both having your inlaws hacked off at you for losing their money, plus you're out looking for a new job after giving up your former career a month earlier.
Good luck and keep us posted on how it works out for you,
Gary |
