Spare $5000?

One of the favorite questions by beginners is, “Can I trade your system or invest with a trend follower with $5000?” Not sure where this number comes from, but it always seems to be the same $5000 for all beginners!

I noticed the other day that Ed Seykota was asked at his site Seykota.com (and I paraphrase):

“I have $5000…should I keep trading or stop until I gather equity to diversify?”

In true Seykota style he responded:

“Say you want to buy a car and only have a few dollars. I wonder if you: Go out and purchase something in your budget, like a spare tire (or) wait until you can afford to buy a whole car.”

He then added:

Plan A:
Drive this around for a while.

Plan B:
Save up and buy a whole car.

Plan C:
Develop a trading system and attract capital.

Another long standing view on the “capital” needed to trade.