A recent site visitor sent me a question via the contact form. It brings up something I’m sure quite a few others have at least thought about at times in their trading development and/or career. After all, who wouldn’t want the opportunity to trade with a larger stake?
I’ve been reading your blog for a while and I have a question to ask. Do you know about angel investors for traders?
I traded with my own money before (6 years ago) but lost a sizable chunk of it. I want to get back in the game and currently trade stocks and options on a demo account.
I practice good risk and money management and try to chose only trades with the highest probability of success and minimum risk. I treat my demo account with all respect as it was real money. I feel that it holds a key to my financial independence.
I intend to continue to do so until I reach a constant 1%/week average gains. (As of now, I am up 5% since inception 2.5 months ago).
Then I will feel confident enough to start trading with real money.
However, there lies a problem. My demo account is $100K and I use strategies suitable for this account size. Unfortunately, I don’t have that much real money to trade (only trade what you can afford to lose, right?). The best number I can come up with is $10K. I am afraid that with this size of account I am doomed to fail.
So, I plan to present my entire track record (including some really dumb trades that I did in the beginning) to someone who would be willing to “buy” equity in me.
They would open a real account and let me trade it for, say, a year. They would keep 90% of profits if I am profitable (I hope I will be) but assume all losses. If I end up losing, they would take the account away. If I keep winning they may add to it and so on.
Once my profit share reaches $100K I plan to trade on my own. That would be money I could afford to lose.
Do you know if these people exist at all and if so, how do I get in touch with them?
I need someone for whom $100K would feel like a small change.
My first question for Nikolay would be why he thinks that the strategy he’s using in demo trading wouldn’t work with a $10,000 account? I can guess at potential answers, but I would also want to take a look at things to see if there could be ways to adjust the strategy to employ less capital.
As for whether there are these “angel investors” out there, I’m sure there are some. I couldn’t say how to find them, though. Also, a 2.5 month positive track record against a 6 year negative one isn’t likely to inspire much in the way of confidence in a prospective investor.
An option to consider may be a prop trading operation. This is not a subject I am well educated on, but Brett Steenbarger posted on the subject fairly regularly, so you can search through his blog (he also talks about it in the Trading FAQ).
If any reader has a suggestion for Nikolay, definitely leave a comment below.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.