Day trading capitalisation

It's Snake Pliskin · 21 August 2007

I am interested in how day traders capitalise their trading businesses. Are people using straight stocks, CFD's on leverage, futures, options etc?

Why do you use what you use? Is using leverage a problem for you? Is being sufficiently capitalised reason enough to only use straight stocks?

I am not looking for direct advice. More a philosophical discussion.

Have a nice day.

caleb2003 · 21 August 2007

I have been daytrading the indices with IG and have found the leverage great, when I've been disciplined, but made a few mistakes with poor money management and had some big whacks.

Got my discipline right just in time for this volatile period and doing ok (about 70% accuracy, but more importantly sticking to my stops and cutting losses, although exits are something I need to work on).

Looking to try Futures now I've built up sufficient capital to do so as it should work out cheaper.

Cheers

Pager · 21 August 2007

I only trade Index futures and you dont have to be hugely capitolised to start, in fact its better to sart small and grow your account, start big and you will most likely end up small, they are simple and straightforward, cheap to trade and ranges most days are very good.

For me they are a very even playing field, no one has much of an advantage over anyone else, with stocks often some people are far better informed than others, although insider trading is illegal I think it occurs far more frequently than we realize, even if its someone obtaining information only seconds before everyone else, that’s enough time in this day and age to make a quick killing long or short with futures that news on a stock in the index would most likely have little if any impact.

Leverage makes Futures a very attractive vehicle to trade, but stops at all times are a must.

Margin requirements for day trading are low and very straightforward to understand, plus the big advantage over Index CFD, s is the fact futures are exchange traded which for me puts the broker on my side.

Stocks I don’t trade but rather invest, IMO futures are the best day trading vehicle by a mile.

Cheers

Pager

ducati916 · 21 August 2007

Snake

The issue is not how much leverage can you qualify for, but, how much leverage can you employ.

It is easy to qualify for x200+ leverage [example Fx]
But assume equity of $100K * 200 = $20,000,000.00

Who would place a $20M position?

Therefore, as I stated, it is not the leverage that you can qualify for, rather the leverage that you can employ in a risk adjusted manner [taking into account the cost of that capital]

jog on
d998

caleb2003 · 21 August 2007

Pager said:
I only trade Index futures and you dont have to be hugely capitolised to start, in fact its better to sart small and grow your account, start big and you will most likely end up small, they are simple and straightforward, cheap to trade and ranges most days are very good.

For me they are a very even playing field, no one has much of an advantage over anyone else, with stocks often some people are far better informed than others, although insider trading is illegal I think it occurs far more frequently than we realize, even if its someone obtaining information only seconds before everyone else, that’s enough time in this day and age to make a quick killing long or short with futures that news on a stock in the index would most likely have little if any impact.

Leverage makes Futures a very attractive vehicle to trade, but stops at all times are a must.

Margin requirements for day trading are low and very straightforward to understand, plus the big advantage over Index CFD, s is the fact futures are exchange traded which for me puts the broker on my side.

Stocks I don’t trade but rather invest, IMO futures are the best day trading vehicle by a mile.

Cheers

Pager

Pager, which broker do you use?

Pager · 21 August 2007

caleb2003 said:
Pager, which broker do you use?

Have sent a PM caleb.

It's Snake Pliskin · 22 August 2007

ducati916 said:
Snake

The issue is not how much leverage can you qualify for, but, how much leverage can you employ.

It is easy to qualify for x200+ leverage [example Fx]
But assume equity of $100K * 200 = $20,000,000.00

Who would place a $20M position?

Therefore, as I stated, it is not the leverage that you can qualify for, rather the leverage that you can employ in a risk adjusted manner [taking into account the cost of that capital]

jog on
d998

Duc,

Good points worth noting. Yes, the employment of capital or leverage is worthy of discussion.

Your comments in red I have highighted.

It's Snake Pliskin · 22 August 2007

caleb2003 said:
I have been daytrading the indices with IG and have found the leverage great, when I've been disciplined, but made a few mistakes with poor money management and had some big whacks.
Cheers

Caleb,

With the big whacks was it a case of too much leverage = too big of a position size, or too lenient with stopping losers and delaying a loss?

It's Snake Pliskin · 22 August 2007

Pager said:
I only trade Index futures and you dont have to be hugely capitolised to start, in fact its better to sart small and grow your account, start big and you will most likely end up small, they are simple and straightforward, cheap to trade and ranges most days are very good.

For me they are a very even playing field, no one has much of an advantage over anyone else, with stocks often some people are far better informed than others, although insider trading is illegal I think it occurs far more frequently than we realize, even if its someone obtaining information only seconds before everyone else, that’s enough time in this day and age to make a quick killing long or short with futures that news on a stock in the index would most likely have little if any impact.

Leverage makes Futures a very attractive vehicle to trade, but stops at all times are a must.

Margin requirements for day trading are low and very straightforward to understand, plus the big advantage over Index CFD, s is the fact futures are exchange traded which for me puts the broker on my side.

Stocks I don’t trade but rather invest, IMO futures are the best day trading vehicle by a mile.

Cheers

Pager

Pager,

Are you trading the Australian market only? Or other markets?

caleb2003 · 22 August 2007

It's Snake Pliskin said:
Caleb,

With the big whacks was it a case of too much leverage = too big of a position size, or too lenient with stopping losers and delaying a loss?

No Pos sizing was fine it was purely due to not stopping losers and hoping for a rally but then getting pummelled when the rails came off. The main problem though is that the major hit I had was on the dax which had the biggest margin so really put me near margin territory whereas a similar hit on the asx would not have had anywhere near as bad an effect.

So I suppose the leverage was a big issue but only due to my slackness. I suppose if you play with fire at some point you may get burnt!

Trembling Hand · 22 August 2007

caleb2003 said:
No Pos sizing was fine it was purely due to not stopping losers and hoping for a rally but then getting pummelled when the rails came off. The main problem though is that the major hit I had was on the dax which had the biggest margin so really put me near margin territory whereas a similar hit on the asx would not have had anywhere near as bad an effect.

So I suppose the leverage was a big issue but only due to my slackness. I suppose if you play with fire at some point you may get burnt!

Day trading you should still be looking at only a small % Stop loss per your account size (2% or 3%?). it will always be suicide to trade, Day or other wise, any size that can bring your account close to a margin call on any one trade.

Temjin · 22 August 2007

I put it this way, most people may view leverage as a double edge sword but I view it as the only way to minimise the initial capital I need to trade my system.

Leverage allows one to utilise money management techniques with lower capital requirement. Under-capitalised is one of the big problem that a low of traders face because they cannot practice fine-tuned position sizing strategies, but the high leverage in futures/forex allow one to practice it as efficiently as one with a large account. ($million+) This ultimately increase your system performance due to the position sizing strategies.

So no, leverage is not a problem for me, it is more an opportunity.

caleb2003 · 22 August 2007

trembling Hand said:
Day trading you should still be looking at only a small % Stop loss per your account size (2% or 3%?). it will always be suicide to trade, Day or other wise, any size that can bring your account close to a margin call on any one trade.

Agreed, I have stuck to this since allowing say max 10 points stop (or $200) (if their is no definable technical stop) in most cases and even though most wins tend to be small the account adds up quickly as the losses are also small.

nizar · 22 August 2007

trembling Hand said:
Day trading you should still be looking at only a small % Stop loss per your account size (2% or 3%?). it will always be suicide to trade, Day or other wise, any size that can bring your account close to a margin call on any one trade.

3% is a bit too much i think.
Even 2% for me was too much (when i was daytrading).

This new system im currently testing, seems to work best with 1-1.5% risk per position.

It's Snake Pliskin · 23 August 2007

nizar said:
3% is a bit too much i think.
Even 2% for me was too much (when i was daytrading).

This new system im currently testing, seems to work best with 1-1.5% risk per position.

Nizar,

What did you use for daytrading? And what was your method of capitalisation?

What was your use of leverage, if any?

Pager · 23 August 2007

It's Snake Pliskin said:
Pager,

Are you trading the Australian market only? Or other markets?

As well as Australian, I trade regional Index futures markets that have good volume each day.

Will also trade the bigger European and US markets but not as frequently.

Day trading capitalisation

It's Snake Pliskin

caleb2003

Pager

ducati916

caleb2003

Pager

It's Snake Pliskin

It's Snake Pliskin

It's Snake Pliskin

caleb2003

Trembling Hand

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Temjin

caleb2003

nizar

It's Snake Pliskin

Pager

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