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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Jon Tara who wrote (7198)	3/10/2000 9:05:00 PM
From: Cormac	Read Replies (2) \| Respond to of 18137

Jon - How would you respond to the following scenario? A daytrader that only keeps 50k in his/her account each month...any surplus is withdrawn every month. They work only about 40 weeks out of the year...rarely will they work each day in a month and rarely every hour every day. They will not enter trades without a potential of 3/8 to 1/2 point and will make an overnight trade (strategic vs becoming an investor) 2 - 3 times a week...some would call them a scalper but I would disagree. If their trading statistics (after commissions)for a normal month were... average trades per day - 18 (round trips) average points per day - 8 3/16 average percent of winners - 69 % average profit per day - $3191 losing days - 0 high - $8987 low $406 high % - 78% low % - 44% losing days in the past 18 months - 3 I just think you are way off base on your $500,000 requirement...each trader can find their own comfort zone and niche and IMO flourish with the skills that they hone. Respectfully, Cormac

To: Jon Tara who wrote (7198)	3/10/2000 9:05:00 PM
From: Jon Tara	Read Replies (1) \| Respond to of 18137

"$50,000 question" - a matter of philosophy... Here's a thought that I hope will clarify where I am coming from on this: My view is that the current market is an extrodinary one - a once-in-a-lifetime opportunity. I do not think that it will last forever. Maybe another week, another month - another year or two - I do not know. But I am certain that it will not last, say, for 10 years. (And if it does, it will experience one or more serious corrections - enough to wipe many traders out - between now and then.) How can I best take advantage of this extrodinary market? I feel that I can best take advantage of it by pyramiding profits as quickly as possible. My primary goal is to increase my trading capital. The more trading capital I have, the more I can take advantage of the advantageous market environment, and the more money I can make. If at all possible, then, I do not want to take money out of my trading account. None. I pay my trading expenses - quotes, computer, etc. out of my "day job" income, as well as, of course, my daily living expenses. I am fortunate enough to have enough left over to also add to savings, which is separate from my trading account. Because I am a consultant, it's important for me to have some money to fall back on, and that I keep separate from my trading account. I currently don't add to my trading account, because I feel that the security of a separate savings account is important both as a practical matter and in terms of how I approach the market. (I would do so, however, if I felt that my savings were in excess of my potential emergency needs.) What I do in the market is not life or death, and so I can trade more agressively. To quit working my day job, and live off of my trading account, it seems to me, would be egotistical and counter-productive - unless, of course, I felt that it would increase my trading profits sufficiently to more than make up for the drain of the expenses. My experience, when I have had an opportunity to trade full-time, is that my returns have NOT been increased a bit. (Though the commission income earned by my broker HAS. :) ) Given that, I must conclude that the only thing to be accomplished by quitting my day job would be to stoke my ego, at the expense of reducing my trading capital. Further, I am a software engineer - I have a job that requires constant updating of skills. A 2-year hiatus, for example, would probably end my career. Under the circumstances, day-trading full-time does not seem a rational thing to do. I would consider it only if my living expenses represented a small percentage of my trading capital - say, 10%. For me, then, that demands $500,000 in capital. I would do it then, not because I feel that it might increase my profitability, but because it might gain me a bit of sleep and relaxation - something that I am willing to pay a reasonable price tag for. As it is, though, the ONLY thing that I seem to lose by keeping up both IS a bit of sleep. And I don't mind that because, I feel, extrodinary times will reward extrodinary effort. Again, everybody's situation, needs, and temprament are different - adjust accordingly! (Attention: east coast residents - your milage may vary.)

To: Jon Tara who wrote (7198)	3/10/2000 9:16:00 PM
From: Dave O.	Read Replies (1) \| Respond to of 18137

< ... 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. > I think one assumption you're making is that one lives at their income level which is not always the case. Personally I didn't deprive myself of things but managed to live well below my income level when I had my corporate job. And these days I couldn't spend $50K a year if my life depended on it. < the mortgage company won't wait until the end of the year for their money. > Again, you're assuming that one has a mortgage in your scenario which will increase the required trading profits. But lots of people have houses paid off. < re: expenses ... as I beleive that you get what you pay for. $4200 for quotes. > I don't pay anything for Level II and if one trades frequently enough at any direct access broker there is no monthly cost. < our mythical trader who tripled his money really only increased his trading capital by $7,800, a paltry 15.8% return > With the assumptions you made the above is correct. But throw out the quotes, mortgage and $50K cost of living and the rate of return could be much higher. < Are we to expect every year to be like the past one? > Personally I don't care if the market goes up 50% or down 50%, as long as there is volatility there is plenty of opportunity to make money. Not sure if you play the short side but if not you're really limiting yourself. < 50,000 just isn't enough. Anyone who thinks so is suffering from a dillusion > Although you're entitled to your opinion the above couldn't be more wrong. I know people who started with $50K and have done quite well. But, as I implied above, they do not have the expenses that your scenario lays out. One thing I have trading full time is freedom. I don't have to trade all day. I can take days off whenever I choose. And I sure as heck would never go back to a corporate job and give all of that up. Dave

To: Jon Tara who wrote (7198)	3/10/2000 9:35:00 PM
From: OZ	Read Replies (4) \| Respond to of 18137

I assume that you meant "in a year"? (If not, please clarify...) I meant whatever unspecified time frame you mentioned in your first message (when you said double your 50,000) which I too assumed was a year. I still think 50,000 is enough. Though when I said it, I did not think I was going to have to write a procedure. But I will say that the person starting off with 50,000 needs to have pre-planned and pre-paid off most of his bills. They also need to have at least $25,000.00 or more in cash to live on during the startup. Probably more accurate would be say that they need 6 months living expenses in cash. This eliminates the pressure caused by feeling that you have to make money to live in the beginning. Another caveat is that the above scenario is for a single person without dependents. If one has dependents, then one would probably increase the numbers. But I still would not need 1/2 a million to start. But if they think they did it because they are skillful (this is a market that makes everybody a genious...) I don't care how strong the market is. If one does not know how to trade the stock they will not be in it for the rise. I see people constantly losing money on "strong days" and the real traders making huge on horrific down days on the long side. Though I do think during the initial internet craze anybody just about could make money. Those people are already out of the game though. Anyone who thinks so is suffering from a dillusion. I find those kind of comments overly harsh and unecessary. That is the reason trader friends of mine like TraderAlan, Palo Alto Trader, KM have as a matter of fact chosen not to post here anymore. I feel like when I learn something new I want to pass it along to people so I wrote the post and re-tested the waters. And as usual, some tells me I am flat wrong or under dillusion. Why can you just not post your experiences as they relate to you without telling people they are under dillusion or wrong. I feel that it is not worth my efforts to post here anymore. But sometimes I just cannot help it. I guess a dog always returns to his vomit. Good Trading, OZ