Funding My Getaway

Stock trading is, of course, a high-risk venture. Not only is there a chance you’ll make no money at all, but a more than even chance that you’ll lose everything you’ve got. Nobody has to tell me that. I’ve lost LOTS of money in the market and once—in one egregious trading misstep—lost just about all my trading capital in one disheartening order-entry screw-up.

But how much dough do you need to succeed? Well, I find it’s wise to only trade with a percentage of my life’s portfolio, not all of my savings. Smart traders that I know keep a minimum amount in their trading account and regularly siphon off their profits to more conservative places. I regularly stick money in a plain, old vanilla savings account with Ing.

But truth be told, with today’s generous margin accounts, you don’t need a huge amount of your own dollars to make enough money to runaway and have fun. Most online brokerages today will let you gamble (yes, I said gamble) on margin with amounts equaling three or four times your account balance. That means if you’ve got $25K in your kitty (the new minimum for pattern day traders), you can  trade on margin with $100K. If you’ve got $50,000, you can day trade with $200,000. That’s plenty of dough to make a respectable showing or wish you have never heard the phrase “stock market."

Obviously, if you’re a beginner trader, I wouldn’t recommend throwing around that kind of cash, but even with $5,000 or $10,000, you can grow your account as you nurture your trading skills. I try to keep my account capitalized with $30,000. That way, I'm seldom in danger of getting one of the nasty "maintenance calls" from Ameritrade saying I've slipped below the required $25K and would I please wire them the shoftfall. Moreover, I can siphon off any excess cash into safer investments like pork bellies or junk bonds (just kidding).

When you’re ready to run away, you might be able to generate between 1 percent to maybe 5 percent on your account each day. If you do the math that means with $25K you should be able to earn $1000 a day. At minimum, that’s enough to comfortably put you up in the deluxe ocean tower of Hawaii’s Sheraton Moana hotel (room rates, $625 a night), or New York’s Waldorf Astoria (bunk in a standard room at $593 a night).

But, as they say, everything is relative.