How much capital do you need to trade full time?

[Sharky]

This question pops up quite often so lets put it to the vote - assume the trader does have some ability to squeeze money from the markets!

 

[FetteredChinos]

based on a return of about 20-30% a month with sensible money management, then £20k living in london should do it => £4k a month

puts a lot of pressure on though, so perhaps £50k would allow for a few lean months.


all depends on circumstance though, and number of dependants...
FC

 

[zambuck]

Depends if 'Full time trading' means that trading in stocks is the only source.....

If you a have other means of income i.e property rentals etc, then trading in stocks income is only 'holiday money' as far as last few months are concerned.......

I believe that returns from markets in next few months will be very difficult....

 

[Newtron Bomb]

You can trade for a living with a £1000.

Its hard but it can be done and largely dependant on the market you trade and the market conditions.

Regards
NB

 

[frugi]

The question depends on what is meant by a "living". Some can survive on less than 10k income a year, others with heavy commitments may require 50k plus.

I'd say 25k is enough to comfortably make 10k-20k a year.

 

[Newtron Bomb]

frugi
A good point. Your personal circumstances will dictate what "a living" requires

NB

 

[FetteredChinos]

tell me about it.

those girls dont come cheap......

 

[Trader333]

This is the wrong question for the options given. If you wish to trade US stocks for a living you have no choice but to start with over $25K However, for futures it could well be substantially less and in any case the answer will depend upon each individuals monthly outgoings which is bound to be different for everyone.

In my view a better question may be to say "based on a monthy need to have an income of xxx , how much starting capital is needed assuming no minimum requirements for PDT etc"


Paul

 

[BBB]

If you cant trade, no amount of money will help.
If you can trade, any amount of money will help.

 

[Dave1971]

Sorry if this is a bit off thread, but are we talking about the amount you would need to build your capital up to, to give up the day job?

I have a half decent very secure job, a mortgage and 2 young kids, in my early 30's. Call me risk adverse but I would need at least 5 years domestic commitment money stashed in addition to my trading account before I moon the boss

I reckon without the commute and other expenses associated with work, I could get by on £2,500 per month so times 60 months that is £150,000 plus the trading account.

 

[FetteredChinos]

what makes you pick 5 years dave? why not 10? 20?

surely after 2 or 3 years trying to trade you would know whether you could do it or not? thus rendering the 5 years emergency money a bit extreme.

or would you need a few years to recover from the shock of losing so much initially?

took me a while to come to terms with that!

FC

 

[Dave1971]

Even if I had a run of 2 - 3 years of consistent profits sufficient to make me think of giving up the day job if would always have a small fear of 'losing my touch' and not being able to make money trading any more.

maybe I am over cautious and lack confidence, but that's probably because I have never been self employed, or out of work, and so have never really had to worry about where the next bundle of cash is coming from.

I suppose however that if I found the right level of consistency I am sure I would also find that work gets in the way of trading and would want out sooner rather than later

 

[Mr. Charts]

Dave1971,
You need to have a range of strategies for different markets and have the actual experience of trading different market environments before you can judge whether you really will succeed.
If you are day trading then you are going long and short very often and the assessment period is much shorter.
You also need to ensure you are not prone to any rash trades, i.e. you are actually trading the plan.

 

[TWI]

I know a room full of people who make their living, a good living for most of them and at the beginning of the month never have a balance above £20k.
I never keep more than 35k in my account.

 

[FTSE Beater]

If you cant trade, no amount of money will help.
If you can trade, any amount of money will help.

...or as I prefer to say

Buying Power is Nothing Without Control
___________________________________________

Hi Dave

maybe I am over cautious and lack confidence,

You have to be cautious IMHO, as you have 2 kids to think of.
I agree with FC, 2 years is plenty of time. Before you go full-time though, there is a lot of work that can be done before hand. Paper trading, strategy testing, simulated trading etc. which all takes time and is something you can easily do while your still working.
___________________________________

You can trade for a living with a £1000.

Its hard but it can be done and largely dependant on the market you trade and the market conditions.

I couldn't agree more

 

[JTrader]

As Newtron Bomb says, you can trade successfully for a living with £1000. However, £2000-£5000 will be better.

 

[JonnyT]

I think £5000 is much to low.

More like £30000+ is required.

JonnyT

 

[rog1111]

Speaking from personal (Nasdaq, not scalping) experience, I think that if you are starting out with a small account, and expecting to withdraw enough funds every month to live off, and at the same time steadily grow the account, then you will potentially be putting yourself under WAY too much pressure, most likely leading to overtrading or taking on too much % risk per trade. In order to practise some sort of emotional detachment (a pre-requisite for successful trading IMO), you just don't want this type of pressure daily. Also, drawdowns on the account are inevitable, and can cause emotional chaos if under huge stress to produce profits. I would say that, for my moderate overheads, I would need an account size of £50,000 to trade full time, and even then I'd want other SOIs to weather the bad times. Having this account size would allow me to diversify my strategies, in an attempt to reduce drawdowns and produce a smoother P&L.

(My comments don't apply to scalpers who generally have a steadier equity curve, as their amount risked per trade is often negligible)

rog1111

 

[zarif]

Regarding Amount of capital.
You need to have to be fairly capitalised in order to make a living.What is your amount for financial freedom thats the main question. Also without right knowledge than no money is enough.
also to put it mildly from a quote regarding finance "IF YOU EAT LIKE A BIRD YOU CANT EXPECT TO **** LIKE AN ELEPHANT"
rgds
zarif

 

[jpwone]

"IF YOU EAT LIKE A BIRD YOU CANT EXPECT TO **** LIKE AN ELEPHANT"

For some reason I always smile whenever I see that quote.

In essence you need enough capital to safely give a return which matches your living requirements. In my own case my requirement is very small (my desire is a fair bit bigger but the actual requirement is small). With the exception of a very small mortgage everything we own is paid for and my partners part-time job covers our day to day living expenses. From my trading I need to cover the equipment, connection and data costs and then have a basic requirement of $50 per day. Not a lot to aim for or achieve is it

So, as I trade mainly Forex I could trade for trade a living with a capital base of around $2000. I use more than this as I do like the occasional luxury (butter on my bread etc.) . I risk between 0.5 and 1% of capital employed per trade and expect to achieve at least a 2:1 win to loss ratio with a risk/reward ratio average of 1:2.

If my intention was to match my salary potential then I would need to earn in the order of $150,000 per annum and would use $30,000 to $50,000 as my base capital. In my opinion how much you need to trade depends largely upon how much you need to live on.

There is another factor here which should be considered. Your capital requirement is also affected by your consistency as a trader. I know I can sit at the PC and earn money. I know this because I do it and I do it consistently. You could have all the capital in the world but if you cannot trade then you cannot earn a living from it. Another old quote which springs to mind here is "Whats the quickest way to get a million pounds trading. Start off with two million."

The bottom line is that how much you need depends largely on how much you want and whether you have the skills to use it to get the return you want.