Recommended start-up capital and broker

[WaveSurfer]

Hi,

Just two Q's, could not find anything in relation to the first one on the forum. Please excuse my ignorance and newbieness (lol) if I have missed something.

1) What amount of start-up capital would you recommend when first getting started in futures and stock/CFD trading? I would like to trade with IB, but do not have the 10k USD to open an account. I am thinking between $2000-$3000 AUD and see how I go from there. Is this too much/too little?

2) What broker/firm should I consider using? I will eventually end up at IB when I have the 10k USD, until then I am not quite sure. I also need a real-time feed as it suits my trading style. My short list is either:

ANZ E-Trade - Although I despise the trading platform, I bank with ANZ so it makes things a bit easier.
IG Markets - Platform seems OK, I would prefer a non-web-based platform though (demo was web based).
GO Markets - Seems to be the best platform I have tested to date. Not sure if this is a bucketshop. Variety of markets is excellent.

Before anyone jumps the gun about the newbie, I have been trading spot forex for about two years now. The last year has been consistently profitable. I have also been demo trading with ANZ etrade and a few other firms for the past 4-5 months. I believe I am ready to start dipping my toes in the water so-to-speak :D

I understand the benifits and risks with margin/leverage trading and don't mind having a leveraged account, I know not to abuse it.

[WaveSurfer]

Oh, and what's the go with this no stop loss thing? :eek:

Coming from forex, I'm used to hard stops and trailing stops. Whether it's a market or limit order. I see the trailing stop options in the platforms I have tested, which is what I'll have to use as a substitute if there is no hard stop options.

If there is no such thing as hard stops in this game, it's no wonder so many go bust :confused:

[tech/a]

Trade on sim and save the money.
Through taking only paper losses and your savings.

Starting capital $30k ideally.
Broker IB there are none better.
Shorts MFG CFD.If not trading futures.

[WaveSurfer]

Thanks tech

[Wysiwyg]

Trade on sim and save the money.
Through taking only paper losses and your savings.

Just to add that ... I believe confidence (and not over-confidence because then blindness is apparent) will help you to SEE more oportunities than you know what to do with.
Simulated trading to the point where you have a `consistent` success rate will naturally create confidence (not over-confidence but ;)).

Okay I will stop preaching. :)

[Trembling Hand]

1) What amount of start-up capital would you recommend when first getting started in futures and stock/CFD trading? I would like to trade with IB, but do not have the 10k USD to open an account. I am thinking between $2000-$3000 AUD and see how I go from there. Is this too much/too little?


Can you run us through how you would trade stocks with $2000-$3000 . What type of trading are you thinking about?

[WaveSurfer]

Just to add that ... I believe confidence (and not over-confidence because then blindness is apparent) will help you to SEE more oportunities than you know what to do with.
Simulated trading to the point where you have a `consistent` success rate will naturally create confidence (not over-confidence but ;)).

Okay I will stop preaching. :)

Yes, agreed 100% wysiwyg. Confidence (not over-confidence) is a major hurdle in this business. Once acquired, the market definitely talks to you. I am confident with currency trading and have been through the over-confident stage too. I believe I have acquired many of the aspects required to consistently trade profitably both emotionally and technically. I started with a small amount in forex and have substantially built it using strict money management and disciplinary trading.

To be honest, I find it much easier to trade stocks and futures than forex. It seems they play much nicer with a higher degree of predictability. Forex can be a little wacky at times. Volume also paints a very clear picture, something forex cannot offer.

[WaveSurfer]

Can you run us through how you would trade stocks with $2000-$3000 . What type of trading are you thinking about?

I'm largely a technical trader, indicator free using price action/patterns and volume. I own a small business so I can also relate to the fundies quite easily. It's not gibberish when reading a company report, and I can decipher between the lines.

My intention was to start light, trading the bare minimum amounts, not leveraging myself out to the max. I don't plan on earning an income until I feel confident enough to invest larger amounts. I guess you could say I am extremely conservative and patient.

My main objective is to just get a feel for it really. Even if this meant only making a few bucks each trade (after brokerage fees of course). Paper trading does not cut it with the emotional side for me - I still know however to get that down before going live (lessons learnt the hard way before). I generally hold trades for days to months and will intra-day when my mindset and the market conditions are right. I am not a scalper so-to-speak.

I would be employing the same money management as I do with spot fx, no more than 1% risk on a trade and keeping my true margin down to 1:1 or 2:1.

[beamstas]

Example (risking 1% per trade)

$6 Each way

Capital: $3000
Drag per trade: 2%

Capital $2000
Drag per trade: 3%



$12.50 Each Way

Capital: $3000
Drag Per Trade: 4%

Capital: $2000
Drag per Trade: 6%


Thought you'd like to know this. Especially with a broker like mfg or first prudential (good cfd providers), you will have quite alot of drag on short term trades (drag meaning how much % profit you'll need to make to cover your brokerage). Unless you are catching big moves constantly i cannot see you trading profitably over a 1 day time period. It just won't happen! You either need to trade on very low comms $1-$2 each way or take another approach

Trust me. I am in the same position as you. ;)

My advice: Listen to tech/a OR if you MUST trade do so over a longer period of time where you can follow trends.

Brad

[johenmo]

Thought you'd like to know this. Especially with a broker like mfg or first prudential (good cfd providers), you will have quite alot of drag on short term trades (drag meaning how much % profit you'll need to make to cover your brokerage). Unless you are catching big moves constantly i cannot see you trading profitably over a 1 day time period. It just won't happen! You either need to trade on very low comms $1-$2 each way or take another approach

Trust me. I am in the same position as you. ;)

My advice: Listen to tech/a OR if you MUST trade do so over a longer period of time where you can follow trends.

Brad

Nick Radge mentions in one of his articles the more capital the better. Paper or sim trade using 20K and using 100K. You'll see the difference. I did and that convinced me that 20K is hard to do. I calculated the amount needed where the brokerage drops down to a level where it won't drop down significantly. I think it was 60 - 80K level. But it depends on the trading yr doing.

I am now getting help and have found a mentor who has helped me look at things differently. I won't do what he does but I can learn from his experiences.

[WaveSurfer]

Thanks for the replies people. Much appreciated.

Yes, demo/paper trading with the 100k capital most brokers seem to give you can be misleading. I am however aware of this from the spot fx trading over the years. I do treat it as if it were a live account, using only the amount I'd planned on using in a live account.

99% of my trades are based of the daily and above charts. I'll generally drop down to the lower time-frames to fine tune my entries. The trades that last only a day or less are usually bad trades or there's confirmation of a reversal earlier than anticipated.

That said, I will be waiting until I build the capital for an account with IB. I'll be carrying over my fx trading into this account as well, so I'll be starting with 10-15k US trading fx only. I'll take tech's advice and only start trading stocks when I have at least 30k of capital and stick to the paper trading until that time.

I wish IB offered a demo account :(

Thanks again for all of your help.

Cheers

[WaveSurfer]

Oh, just one more Q.

How in gods name do you set a hard stop loss?

Would it be that you place an opposite buy/sell order of the same amount at the predetermined stop level? I guess this could only be done if the broker does not allow hedging right? Or is there something I am missing here?

I trade fx through MB Trading using the ninja trader platform. While you can't set hard stops there either, ninja trader does have custom strategies/scripts allowing you to set the hard stop on any order type.

The last thing I want to do is be sitting there watching every trade tick-by-tick to manually stop myself out if it goes pair-shaped.

[WaveSurfer]

No matter, I found the answer to my newbie Q above :o

[Sicilian Trader]

can i just add a couple of questions to this forum, relating to

- account size
- recommended markets
- brokerage costs

I have been trading for about 1 year, mostly in asx 200 (unleveraged) and most recently , say last 6 months, in CFD's through CMC. Whilst I have been doing reasonably well, im starting to feel the effect of the accruing interest component as my holding period is days, if not weeks.

Currently :
7.5K used equity
50K current total open trades / size of p/folio
7.5K free equity

(therefore about 3:1 leveraged)

My gross ROE (on the 15K) in the past 4 months has been ~8K

less
interest / brokerage during that time ~ 2K

net
6K


One of my questions relate to CFD's. Many traders / asf posters say they avoid CFD's like the plague because the interest drains their account (assuming you are medium term trader). Many say they would rather stick to futures on a small account (20K and under)


Do others here concur?


I understand that some of this is offset with dividends (albeit unfranked and assuming of course you hold for a long enough period), but my other question is whether or not I am better off using my same strategy in say mini gold / oil / soybeans, where :

- i am only paying the spread and no commish (this accurate?)
- i am not paying any interest if I am long on futures, for example of gold for 2 weeks (again , correct?)
- and due to my account size being small

Another question on CFD's while I have the floor here is - do some people avoid MM because they have a fear that the MM will see their stops and move to trigger them?? (i must admit this thought or concern has crossed my mind, but i am not sure if it is merely a common misconception)


Any help on where one with a small trading account (trying to minimize interest and brokerage) would be better served , would be appreciated

Here are some assumptions before some of your cyber trading guardiarns chime in
- assume my strategy is sound (simple and effective)
- assume I have enough experience in unleveraged asx blue chip share trading
- assume I have the stomach and mindset to sustain periods of volatility and drawdown inherent in futures
-assume i am aware of the risks etc etc

Looking to some thoughts

ps- WaveSurfer, apologies if I have stolen your thunder

[Trembling Hand]

Sicilian Trader with 15 k you will not be able to position size with real futures. For example 1 mini gold is about 30,000 USD actual value. You will be faced with having 1 contract open at a time.

And you have to pay commis on futures

[MaverickTrader]

Does anyone use Westpac Brokerage? Any good?

[Sicilian Trader]

I have heard Westpac is good now, they have made some decent improvements. They weren't always the greatest thought (from a functionality p.o.v) - just my view.

[Sicilian Trader]

So many people mention that futures are the way to go over other instruments.

Do people prefer futures over CFD's because on CFD's there are holding costs (interest) and on futures there isnt?

Or is it because of better trending markets?

Keen to here why people prefer futures over other instruments..

[Temjin]

So many people mention that futures are the way to go over other instruments.

Do people prefer futures over CFD's because on CFD's there are holding costs (interest) and on futures there isnt?

Or is it because of better trending markets?

Keen to here why people prefer futures over other instruments..

Why not people prefer ETFs over CFDs/Futures then?

There are practically no holding cost (except for the MER and any interest on the currency you may want to borrow to purchase the shares) and could basically track the same commodity / equity index that most of the CFDs/Futures do. It's like buying a continous contract without the need to rollover. And because of the non-leverage nature of ETFs (except for a few), there is no need to put up with high capital in order to trade a future contract, or even a mini-future. Especially when you have access to ultra low commission brokers like IB.

[Trembling Hand]

So many people mention that futures are the way to go over other instruments.

Do people prefer futures over CFD's because on CFD's there are holding costs (interest) and on futures there isnt?

Or is it because of better trending markets?

Keen to here why people prefer futures over other instruments..

If you are a short term trader you would touch anything else. Lowest cost and tightest spreads.

[Sicilian Trader]

thanks TH, i imgaine you meant 'wouldnt touch'

also, how do you define short term trading? 1 day - 3,4 weeks?

thanks

[Trembling Hand]

thanks TH, i imgaine you meant 'wouldnt touch'

also, how do you define short term trading? 1 day - 3,4 weeks?

thanks

Whoop, yes "wouldn't touch".

look at it this way. Futures you cover brokerage in LESS than 1 tick. And most futs have a spread of 1 tick. That makes them very cheap. Now you have to ask is this of any interest to me. If you trade 50 times a year its not here nor there. If you trade 50 times a quarter it starts to become important. If you trade 50 times a week it becomes vital. and If you trade 50 times a day you will not survive paying 3 or 4 ticks as cost.

That's why people who trade luv futs. And what i mean about futs are the real thing not the linked CFDs, real futs executed into the real exchanges.

[Mr J]

I recently calculated the cost of commissions on different markets to help me to decide which market to trade. For an aussie using IB I'd recommend futures. I haven't been able to accurately compare them as I could only guess to what kind of moves would be equivalent to a move in the other (I'm quite new to trading). However, if you were looking for a 1% move in a stock, 20 pip in forex and 10 points on the SPI, forex is 50% more expensive than the SPI, and stocks are four-times as expensive.

[Trembling Hand]

I recently calculated the cost of commissions on different markets to help me to decide which market to trade. For an aussie using IB I'd recommend futures. I haven't been able to accurately compare them as I could only guess to what kind of moves would be equivalent to a move in the other (I'm quite new to trading). However, if you were looking for a 1% move in a stock, 20 pip in forex and 10 points on the SPI, forex is 50% more expensive than the SPI, and stocks are four-times as expensive.

The really big thing that most FX traders haven't a clue about they are losing the spread twice per trade Futs traders when using profit targets only once.

Whats the diff after 200 trades of losing 1.5 tick spi futs (assuming 50/50 win loss) compared to 8 pips AUDUSD. $32,500 :eek: on only 200 trades, F me!!

[Sicilian Trader]

For an aussie using IB I'd recommend futures.

Thanks for the brief comparison TH, certainly food for thought.

Just slightly off topic if I may. There are a host of different software programs out there for trading , testing , charting etc.

Interactive Brokers, Metastock, Amibroker, Tradesim to name a few.

I am slightly confused as to which ones I will need to achieve my trading goals.

Just a quick snapshot of my situation if I could.


Will be starting futures trading in about 2/3 months.
Currently backtesting, forward testing (walk through), papertrading, reading, understanding MM etc
Will be settling on a property during this period and will take out 50K from the net CG to open up a futures account most likely with IB - not confirmed yet
Whilst it wont be cheap, I am giving serious consideration to combining the following two software programs, TradeSim + Amibroker. TradeSim for its testing capabilities and Amibroker for its charting capabilities


So, as i understand it..

IB - for placing trades if you are trading futures / forex
TradeSim - for robust backesting, Monte Carlo analysis etc
Amibroker - for technical analysis / charting etc
MF Global - for using a broker to place special types of orders than cannot be executed electronically (this is my own personal choice)

Do I have each of their functions right? Or am i doubling up with any? I know many here use tradesim + Amibroker or Metastock

Do people also combine these 2 with IB?

I am just getting reading for when i go 'live' (provided i am successful during my due diligence process of course)

Any help would be greatly appreciated, TH, Tech, and any other cyber authority who cares to comment?

Looking forward to getting some pearls of wisdom

ST

[WaveSurfer]

Almost a year on and I'm back with $25,000 in savings (sooo close). Not bad for a uni student. Have been paper trading all this time with one small issue, 14-30 day demo accounts..... :banghead:

I eventually went old skool and spreadsheet'ed my trades using prorealtime for charting. Drives me insane but I'm in it for the long haul. It also changed my trading style, I think this may be for the better anyho.

If only there were a broker out there that offered a demo account that lasted longer than 30 days...

I'm pretty close to opening my live account so it's not a biggy now. But sheeeeze, talk about painful. Don't get me wrong, I loved the experience but at the same time missed the luxuries of eTrading.

Will be back in a month or two with my live account funded with $30k.

Just thought I'd say :thankyou: for the sound advice. Cheers all

[tminus]

Google Finance lets you create a portfolio with transactions to simulate demo accounts.
They have the best free charting tools I have across. Their graphs are easy on the eyes with anti-aliasing/sub-pixel hinting.

Note I am new to trading stocks also.

[WaveSurfer]

Google Finance lets you create a portfolio with transactions to simulate demo accounts.
They have the best free charting tools I have across. Their graphs are easy on the eyes with anti-aliasing/sub-pixel hinting.

Note I am new to trading stocks also.


Thank you tminus. Just what I was a looking for.

I also noticed prorealtime have recently added a paper trading portfolio as well. Google's one looks the the go'er though.

Cheers for that mate.

[WaveSurfer]

ProRealTime's paper trade portfolio requires the real-time subscription to use it.

Google's portfolio is doing the job. It's all I need. Thanks again tminus.