Capital requirements for a sustainable income

Beginner Questions
1

Hello everyone,

      I'd like to pose a question to traders who are making a profit/supplementing their income/living off of trading.With a $10,000 account at a 1:1 risk to reward ratio, risking 1-2% of my account, trading a 1 day to 4 hr time frame, how much would I be making month to month. I would presume I would be adopting a mix of both day trade and a swing trade systems. I'm beginning to speculate that most profitable traders who can live off of trading are either trading for a firm or have an adequate/abundant amount of capital to leverage. Perhaps I'm wrong. My initial appeal to Forex was the capacity to work from any location remotely, with a much larger variety of times to trade, in contrast to stocks, would I be wrong in inferring this?

Thank you in advance for your consideration in responding.

2

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3

I think $10,000 and above. Long term trading is better. you need funds to hold trades

4

Going off your topic “capital requirements for sustainable income” — I interpret this as living off of forex trades — consider this hypothetical. If you trade once per day (30/month) at 2% risk per trade and are right 51% of the time (minimum needed to profit with 1:1RR) then you profit from 16 trades (32% gain) and lose 14 (28% drawdown). This makes your net profit 4% per month.

At 4% you would need to ensure that 0.33% of your equity can cover monthly expenses. If your monthly cost of living is $3,000 then you would need $3,000/0.0033 ~= $900,000 to support yourself trading. This neglects inflation for simplicity.

If you’re just asking if you can survive and thrive in the market with a $10k account, I’d say sure. I get by with a lot less. You could grow it pretty respectably at 4% too if you sustain a 51% or higher win rate. Taking the same hypothetical, monthly 4% growth of $10k is about $400 monthly. Nothing is certain but that should at least be in the ballpark given your parameters (if my math is right)

5

to create a sustainable income, you should start with at least $500k.

5% profit per month will give you $25k per month, or $300k per year.

my wife is sitting here tugging at my shirt, she says that you should start out with no less than two million.

(she is always right)

6

Dang how many people have that kind of money lying around. :skull:

1 Like
7

most people do not have 500k, i understand this, but that is not the issue…

the issue is that we are asking what are the capital requirements to create a sustainable income in the fx business?

i do not think that the answer is $10k.

if i ask you how many gallons of gasoline will i need to go on a thousand mile road trip in my car, i do not think that the answer is two gallons.

:slight_smile:

8

Its healthy in thinking strategically about trading that you frame it in terms of percentages, not $ or ÂŁ.

So if you’re making a certain percentage in a period and you are doing that consistently, you are doing well. As a matter of principle, I always think a strategy should have the capability of producing a 100% gain per year. Just as a single trade should have a return of at least 1:1, so should the trading project as a whole.