Home
>
Stocks & Mutual Fund
>
How Much Money Can I Make With Trading? What Account Size Do I Need To Start?

How Much Money Can I Make With Trading? What Account Size Do I Need To Start?

What account size do I need?

How much money can I make with trading?

First of all, let's clarify a common misunderstanding: You never risk your full account size. You always have a "catastrophic stop", and it is important to define the "ruin" before you start trading. Let's say you start with a $10,000 account, and you decide to stop trading if you lost $2,000. In this example you are "ruined" if your account decreases to $8,000. Though you invest $10,000, you only risk $2,000.

Back to the first question: "What account size do I need?"

The first factor is the margin required by the exchanges. The margin is the "security deposit" that you need to have in your account if you want to trade. This margin varies depending on the contract you want to trade, e.g. $3,938 for the e-mini S&P and $1,688 for the 30 year Treasury Bonds. Many brokers offer a 50% deposit? on this margin requirement if you daytrade, i.e. you open and close the position on the same day.

If your trading system requires trading 1 contract of the e-mini S&P, and you hold the position overnight, then you need at least $4,000 in your trading account.

The next factor is the expected drawdown. If you would only deposit $4,000 in your trading account, the first trade moves against you by more than $62, and the value of your account falls below the margin requirement of $3,938, then you receive a "margin call". Many electronic platforms automatically liquidate your open positions, and don't let you trade any longer. Therefore, you need to know the maximum drawdown of your trading system in the past. Let's say your trading system had a maximum drawdown of $2,200 in the past, then you need at least $6,200 in your trading account: $4,000 margin requirement plus $2,200 "buffer" for a possible drawdown. A safe approach is to double the maximum drawdown, because usually the worst drawdown is still to come.

Let's say that based on these calculations you decide to fund your account with $8,000, and you define your "ruin" as $6,000, i.e. you are willing to risk $2,000 for your trading adventure. How likely is it that you lose the $2,000 you are willing to risk?

Assuming you have a well tested and robust trading system that is likely to achieve similar results in the future as in the past, then you can use the log-normal distribution to calculate the risk of ruin. In the following example we will use the values of our e-mini S&P Trading System "Coin Collector".

The profit factor of this system is 1.42, i.e. for every dollar you lose you earn $1.42. The winning percentage is 70.5%, and the average winner is $129. Using these figures and the results of the past trades, you can calculate the "risk of ruin" for our system:

The probability of losing the whole $2,000 that you are willing to risk in the next 30 trades only is 1.4%. That's very low. If you decide to risk $3,000, then the probability of losing all the money in the next 30 trades decreases to 0.07%.

Let's talk about the next question: "How much money can I make"? You first need to calculate the average profit per trade by dividing the overall profit by the amount of trades you made. In our example the "Coin Collector" produces an average profit of $37. Next you need to multiply this number by the trading frequency. The "Coin Collector" produces in average three trading signals per day, i.e. you can expect $111 per day per contract.

An average week produces 15 trades and $555 profits. Deducting commissions and slippage you can expect $842 in two weeks (=30 trades).

If you catch a lucky streak you could even make more. So how likely is it to MAKE $2,000 within the next 30 trades? The probability of making $2,000 is 20.4%.

Trading is about risk and reward: you want to get a decent reward for your risk. In our example the probability of losing $2,000 is 1.4%, and the probability of making $2,000 is 20.4%. That's an excellent ratio!

Conclusion:

Your account size is determined by the margin requirement set by the exchanges and the "buffer" you should have for an expected drawdown.

The question "How much money can I make?" can be answered using the performance report of the past results of a trading system. Keep in mind that these figures are only valid if you developed a robust (and not a curve-fitted) trading system.

Using some statistical functions, you can then determine the "risk of ruin" and the probability of making a certain amount of money. That's what trading is all about: risk and reward.

----------------------------------------------------------------------

The author, Ben Millane, is a recognized author on the subject of trading systems. His website, http://www.rockwelltrading.com, provides a wealth of informative articles and free information on how to achieve your financial goals through trading.

one time home cleaning Morton Grove ..

In The News:

The Berkeley Humanoid Light (BHL) is a lightweight, open source humanoid robot that anyone can build using 3D-printed parts and off-the-shelf components.

Meta’s new AI chatbot is getting personal, and it might be sharing more than you realize.

A new threat targets both Android and iPhone users: SparkKitty, a powerful mobile malware strain that scans private photos to steal cryptocurrency recovery phrases and other sensitive data.

Thanks to a team at the University of California, Davis, there's a new brain-computer interface (BCI) system that's opening up real-time, natural conversation for people who can't speak.

Privacy risks are hiding in plain sight, as your personal data is likely being collected, tracked, and sold without your knowledge.

VenHub, a fully autonomous, AI-powered smart store just opened at the LAX/Metro Transit Center in Los Angeles.

A woman's Facebook account takeover reveals dangerous social engineering tactics and provides lessons on recovery, avoiding scams and enacting stronger security measures.

Shanghai engineers are using 432 walking robots to relocate a complex, preserving Shikumen architecture while creating space for a modern underground hub and cultural center.

Major healthcare data analytics firm Episource had a cybersecurity incident exposing 5 million patients' medical records and personal information in recent breach.

A new sophisticated PayPal scam sends legitimate-looking emails from official PayPal addresses, using phone numbers instead of links to convince victims to download remote access tools.

Fox News' AI Newsletter brings you the latest on this rapidly evolving technology.

The innovative Kara Pod device extracts moisture from air to create mineral-rich water and brew coffee, featuring UV sterilization and compatibility with Nespresso pods.

Gov. Hochul unveiled New York's nuclear power plant project to power a million homes, which faces permit challenges while promising jobs and a cleaner energy future.

SAFE introduces Aerie, an underground luxury bunker combining high-end living with advanced security, wellness amenities and interactive walls simulating panoramic views.

A Facebook scammer posing as Elon Musk tricked a victim with promises of a Tesla and $250,000, requesting gift cards that become untraceable once the codes are shared.

Experience hands-free golfing with the Robera Neo smart caddie that uses AI to follow you, navigate obstacles and carry your clubs with GPS course mapping.

Cybersecurity alert: 16 billion passwords exposed in massive credential database affecting major platforms. Protect your accounts with password managers

The innovative BeBot robot uses electric power to remove pollution from shorelines, covering 20-30 times more area than manual collection while preserving wildlife.

A new ClickFix campaign targets macOS users with fake Spectrum support sites, tricking victims with CAPTCHA failures to paste commands that install information-stealing malware.

AI-powered autonomous trucks from Plus Automation are being tested across the U.S., Europe and Asia to solve logistics challenges while facing regulatory hurdles and labor concerns.

Your health information might feel private and secure with your doctor, but the reality is far more complicated. Data brokers collect a wide range of sensitive health data, from diagnoses and prescription details to personal identifiers, and sell this data to marketers, insurers, and other third parties.

Kepler Robotics has officially introduced its Forerunner K2 "Bumblebee" humanoid robot at the SAIC-GM automotive plant in Shanghai, marking a significant moment in the real-world deployment of advanced robotics.

Scammers never seem to be running out of new ways to try and get their hands on your money – and lately, they've been getting sophisticated.

Thirty people were injured and killed, though the exact number remains currently unknown, when a suicide bomber blew himself up in a Damascus church.

Unexpected password reset alerts signal potential hacking attempts or phishing scams. Learn how to respond and establish stronger security measures for your accounts.

How Much Money Can I Make With Trading? What Account Size Do I Need To Start?

Stocks & Mutual Fund