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> I find it an incredible ever repeating cycle
> that there exist so so many undercapitalized would be
> traders that have such supposed "really good" systems.
>
> If what you have is truly good, aka: CONSISTENT. You
> won't need help for very long. Compounding will stomp
> out the problem of undercapitalization.
Try living on the fruits of your compounding if you start out
with $1. Make 50%, 100%, 1000% a year, doesn't matter -- there
still isn't enough to buy groceries.
Compounding works great when you have a decent-sized account, but
***ONLY*** if you don't have to bleed it for living expenses,
taxes, etc. If your trading is your only source of income, then
you need a pretty large account. I wouldn't try it with less
than $250k, and $500k or more would be a lot better. (I *DID* it
with a $100k account, and returned over 50% for several years.
And by the time I paid taxes & other expenses, my account was
smaller after 2 years than when I started. And then you have to
have enough surplus to live through the inevitable dry spells...)
Even if you have some way to shelter your account from tax and
other expenses, compounding can seem maddeningly slow if you
start out with a small pile. We all know markets change, and a
system that works now might not work forever -- or you might just
prefer to retire 5-10 years sooner if you could find a way to do
it. Someone with a $10k account and a 50%/yr system might not
want to wait for 12 years for his $10k to turn into $1M. If he
can make $20-50k a year selling his signals, without compromising
his results, he has a way to grow his account much faster than
50%/yr, and reach his goal MUCH sooner.
Undercapitalization IS a real and serious problem, no matter HOW
good your system is.
Gary
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