Ask Colin

I want to daytrade the current volatile markets to make money for my super fund. How much capital do I need?

Daytrading a super fund is an oxymoron - a contradiction in terms.

Daytrading is an extremely risky undertaking with a very low prospect of success because of the enormous handicap of transaction costs, slippage and overheads. For an excellent discussion of this read Dr Alexander Elder's book Come into my Trading Room.

A super fund should have a long term focus and is the exact opposite of what a daytrader is about. A super fund is about long term accumulation of wealth. A day trader is about speculating in the short term.

The only possible use of daytrading that I could conceive as having a legitimate role in a super fund would be as a small part of the total fund that was focussed on trying to capture large profits in a very unusual market situation like a wild speculative bubble or a panic sell-off.This should only be attempted if you have a proven track record as a daytrader. Daytrading is far more difficult than investing. If you do have a proven track record, I would still not use more than 5% of the total fund for daytrading.

Dr Elder once told me that he thought that US$50,000 was a minimum to trade with, and I agree with him. Lets round that to A$60,000. In that case, your fund needs to be A$1.2million in total before you even think about it.