So after reading material for a few weeks and consulting with my brother, who works in this line of business, I'm going to go ahead and jump in into trading. Question is, I'm not sure for how much? Trading reminds me a lot of Texas Hold'em of where you need a big enough roll to actually be able to maneuver and take some risks to make a profit. Problem is, I don't want to commit too much if I find this isn't for me. So what would a good happy medium be?
How much can you afford to invest is the best answer really. And then half it. At least once. That way you've still got enough money to play around, see what you want to do, but at the same time you're not throwing away a lot of money at the same time if something goes tits up.
I think Livvy makes some good points. I have seen so many people over the years investment way too much of their savings. Play it extremely safe especially while you are still learning. Best of luck!
Trading... not doing it myself so I have no personal experience. But you need something big enough to keep the commissions at a small percentage. That's really what it comes down to... also remember that you pay commissions for both successful as well as unsuccesful trades. And for both buy and sell transactions. (so a min of 2x commission fee per trade)
If you're going to be "day trading" - doing more than 3 "day trades" in a 5 day period that are not held at least overnight one or more days - you'll need to keep at least $25k in your account if you're in the US. I'd keep at least several thousand more than that to offset the constant transaction costs, realized losses, etc. Frequent trading is riskier and much more expensive than more traditional investing.
Are the transaction costs that significant that you'd need to keep that much money on hold? He did ask for a number "to begin with" to that seems a bit excessive.
If you're doing "day trading" by the legal definition of the term in the US, you'll lose "day trading" privileges with your broker if you dip below $25k - they have to follow the federal regs. Having at least an extra 10-20% cushion will at least prevent that. When I day traded for a little while long ago, I'd see the occasional 5-10% decline in account value in a bad day. Some I talk to who say they've survived trading for years and that they're apparently pretty good at it tell me they have lost 25% in a day, and can in theory lose everything in any one given day in many cases. In theory, the ideal situation for one wanting to day trade would be that they have 7 figures total, and that they trade with perhaps $50-$100k, while keeping the remaining money invested in more traditional ways, including an account more conservatively invested that they draw income on (so as not to use their trading profits / principal to live on), and also ideally a retirement account for the future. The risk and expense is why I stopped doing it after a while many years ago. And why I encourage anyone considering it to really think long and hard about it. Liquidating much or all of your portfolio at the end of the day is not the most efficient way to make money anyway in my experience.
Yea incorrectly spoke in the OP. Meant was going to begin investing, not trading. Definitely do not have the bankroll to day trade. Anyway, decided to go with $1,000 to start. Figured that would be enough to get my feet wet and isn't an overwhelming commitment for me financially
Oh wow! I had no idea that $25k is the minimum amount needed in your bank account. I think this still serves as an excellent regulation. I would hate to see poor people getting burnt on this.
