by spoony20
I have been a day trader for 10 years and i have been trading with many ppl around the world. The only ones that survived are those with a large capital.
Lets take Bob as an example. Bob has a $10,000 account. Bob trades every day, spending hours and hours each week studying the markets, charts, videos and take notes. 30+ hours each week Bob spends on the market and he is successful. Every week he makes 1% gain on his account, about $100. For one year, Bob makes $5000 on his $10000 account, a 50% return. Everyone is happy for Bob coz thats a great return. But Bob is not happy. Thats because Bob spends 30 hours each week over 52 weeks to earn that money. Thats about $3 per hour…. But Bob can’t afford any more capital so in order to make trading worth for Bob, he needs to take more risk, higher margins and better positives. This eventually leads to Bob losing money coz he can only afford a few losses in a row.
Now we take Jane who has a $500,000 account. Jane does the same strategy as Bob. Spending 40+ hours each week and making just that 1% each week. 1% of a $500k account is $5,000. Jane ends up with $250k, same 50% return at the end of the year with that $500k account. This is a much acceptable hourly return for Jane so she doesn’t need to increase capital or take more risk to justify her hours. This makes trading worth it for her.
So both scenarios you can see, Capital is incredibly important. Higher capital reduces your risk of taking large positions and lets you ride out your loses longer.