Email: How much money do I need to start trading?

Letter from a reader.

Hi Eli,

I just read a few of your articles and thought I would drop you a quick email.

I liked the analogy about getting through the forest as I think that is where I find myself now. I have been trading the S&P futures for about a year now on my personal account. It hasn’t really got me anywhere. I think that I have a good grasp of risk management but then there is a slight fear of putting capital at risk which I know is crazy but have seen a few others blow all their small accounts and I don’t want to follow in their footsteps.

I think I have reached a point where it may be best to stop, save up and then recommence down the line. How much do you feel is required to make the switch from dabbling in the markets to give it a fair chance of working? However I really want to stay involved as there is really no better way than to spend the day infront of the screens watching the markets.

Many thanks in advance

Note: I am only talking about people what to learn how to trade not someone who wants to know when to trade or have someone else trade for them.

One of the mistakes I made was not going to a prop firm.  I got the money for an account after saving some money and jumping off a bridge. It is always better to learn on someone else’s dollar. It forces discipline and there are usually many other traders around you that have incentives to help you.  I had too much confidence in myself and I was penalized early in my career.

It may not be possible for you to learn on someone else’s dollar. First thing is first, you need a plan.  If you are like most traders, you do not have a plan or it blows.

Once you have a plan you have to figure out a budget.  How much does it cost you just to sit down?  Charts, rent, execution, etc.  Lets say for the sake of round numbers it is 500 a month or 6000 a year.  Next you have to consider your expectations.  The higher the expectations the more capital you need.  Capital gives you time. There is no exact equation because everyone is different.

Once you have a plan, budget and expectation, find someone to help you.  Forum, social networks, or paid.  Do your research and figure out what you want. The key in the beginning is to learn the most while going through the least amount of money.  If you have more money than time I suggest seeking a paid service.  If you have more time than money I suggest learning as much as possible on your own.

At least part of your problem is that you see risk as a bad thing. I would work on changing your definition to start.

One last thing, remember the market will always be here.  Give yourself the best chance and you will know if that is your best chance.

If you have any questions feel free to ask, I respond to all reasonable ones.  Chances are you are not the only person with a question.  You and others get your questions answered and I get a blog post.  A win-win.

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